DiMercurio v. Equilon Enterprises LLC ( 2022 )

1 2 3 4 UNITED STATES DISTRICT COURT 5 NORTHERN DISTRICT OF CALIFORNIA 6 7 MARCO DIMERCURIO, et al., Case No. 19-cv-04029-JSC 8 Plaintiffs, ORDER GRANTING PRELIMINARY 9 v. APPROVAL OF SETTLEMENT 10 EQUILON ENTERPRISES LLC, Re: Dkt. No. 171 Defendant. 11 12 13 Before the Court is Plaintiffs’ motion for preliminary approval of class action settlement. 14 (Dkt. No. 171; see Dkt. Nos. 172, 175, 178, 179, 180.)1 After carefully considering the unopposed 15 motion, supporting documents, and post-hearing submissions, and with the benefit of oral 16 argument on October 20, 2022, the Court GRANTS the motion. 17 COMPLAINT ALLEGATIONS 18 Defendant (“Shell”) owned and operated an oil refinery in Martinez, California. (Dkt. No. 19 157 ¶ 2.) The four Class Representatives worked as operators at the refinery until it was sold on 20 January 31, 2020. (Id. ¶¶ 10–14.) Shell required operators to be available for designated 12-hour 21 standby shifts in addition to their regular 12-hour shifts. (Id. ¶ 2.) There were two 1.5-hour 22 standby periods each day. (Id. ¶¶ 3, 5.) During the standby period, operators had to be reachable 23 by phone in case Shell called the operator to cover an unscheduled absence. (Id. ¶ 3.) If called in, 24 the operator had to arrive at the refinery within two hours. (Id.) If not called in, the operator was 25 not paid. (Id. ¶¶ 3, 9.) 26 The operative complaint asserts claims for “Failure to Pay Reporting Time Pay” in 27 1 violation of California Industrial Welfare Commission Wage Order 1-2001; “Failure to Pay All 2 Wages Earned at Termination” in violation of California Labor Code §§ 200-203; “Failure to 3 Provide Accurate Wage Statements” in violation of Labor Code §§ 226, 226.3; “Unfair Business 4 Practices” in violation of California’s Unfair Competition Law, Business and Professions Code § 5 17200; and civil penalties under California’s Private Attorneys General Act (“PAGA”), Labor 6 Code § 2698. (Id. ¶¶ 38–64.) 7 PROCEDURAL HISTORY 8 Plaintiffs filed suit in California state court in June 2019. (Dkt. No. 1 at 19–31.) Shell 9 removed pursuant to the diversity jurisdiction provisions of the Class Action Fairness Act, 28 10 U.S.C. § 1332(d), and purported federal question jurisdiction under 28 U.S.C. § 1331. (Dkt. No. 1 11 at 2.) The Court subsequently certified the class as to all claims. (Dkt. Nos. 116, 144.) 12 The parties participated in three settlement conferences with Chief Magistrate Judge Spero 13 between May 2021 and June 2022. (Dkt. Nos. 98, 133, 161.) After the third settlement 14 conference, they agreed on major terms, executed a Memorandum of Understanding, and finalized 15 a Settlement Agreement. (Dkt. No. 171-1 at 2–3, 7–37.) Plaintiffs then filed their motion for 16 preliminary approval and proposed class notice. (Dkt. Nos. 171, 172, 175.) At oral argument on 17 October 20, 2022, the Court expressed some concerns with the notice. In response, the parties 18 submitted a first amended proposed class notice. (Dkt. No. 178.) The Court identified its 19 remaining concerns in a written order, (Dkt. No. 179), and the parties submitted a second amended 20 proposed class notice, (Dkt. No. 180). 21 SETTLEMENT TERMS 22 A. Class 23 The certified class is defined as “[a]ll Operators working at the [Shell] refinery . . . in 24 Martinez, California, who were scheduled for standby at any time from June 4, 2015, . . . up to and 25 continuing through January 31, 2020.” (Dkt. No. 144 at 8; see Dkt. No. 116.) There are two 26 certified sub-classes: 27 2016-2019 Waiting Time Penalties Sub-Class employment (either by involuntary termination or resignation) at the 1 [Shell] refinery . . . in Martinez, California, at any time from June 4, 2016 through June 3, 2019, and who, upon separation from 2 employment, did not timely receive all wages owed as a result of reporting obligations. 3 2019-2020 Waiting Time Penalties Sub-Class 4 All Class Members who have been employed and separated from 5 employment (either by involuntary termination or resignation) at the [Shell] refinery . . . in Martinez, California, at any time from June 4, 6 2019 through January 31, 2020, and who, upon separation from employment, did not timely receive all wages owed as a result of 7 reporting obligations. 8 (Dkt. No. 144 at 8.) Plaintiffs estimate there are 300 class members. (Dkt. No. 171-1 at 4.) 9 B. Notice 10 Within 10 business days of this Order granting preliminary approval, Shell will provide 11 class members’ information to the Settlement Administrator; within 15 calendar days thereafter, 12 the Settlement Administrator will mail the approved class notice to class members. (Id. at 16–18; 13 see Dkt. No. 180 at 13–19 (second amended proposed class notice).) 14 The second amended proposed class notice will set a date certain, 45 days after the class 15 notice is postmarked, for class members to opt out of the settlement, object to the settlement, or 16 object to class counsel’s fee request. (Dkt. No. 180 at 14, 16–17; see Dkt. No. 171-1 at 17; see 17 also Dkt. No. 171 at 18 (class counsel representing that they will file their fee request within 21 18 days of this Order so that class members may review the specifics in time to object).) 19 C. Payment Terms 20 The “effective date” of the settlement means after preliminary approval is granted, the 21 class notice is mailed, the 45-day opt out and objection period has run, the final approval hearing 22 is held, final approval is granted, and judgment is entered. (Dkt. No. 171-1 at 8–9.) Within 30 23 calendar days of the effective date of the settlement, Shell will pay $3,200,000 into an interest- 24 maximizing Qualified Settlement Fund created by the Settlement Administrator. (Id. at 11–12.) 25 The parties propose the following payments prior to distributing the settlement funds to class 26 members: 27 (i) $7,500 service awards to each of the four Class Representatives, subject to Court 1 (ii) $1,066,666.67 attorneys’ fees award to Class Counsel (33.33 percent of the gross 2 settlement amount), subject to Court approval; 3 (iii) Up to $45,000 in costs to Class Counsel, subject to Court approval; 4 (iv) $50,000 for the PAGA released claims, with 75 percent paid to the California Labor 5 and Workforce Development Agency and 25 percent paid to class members, subject to 6 Court approval; and 7 (v) Reasonable fees and expenses to the Settlement Administrator, subject to Court 8 approval. 9 (Id. at 12–14.) The remaining settlement funds will be divided proportionally among class 10 members based how many standby shifts each class member had where they were not activated for 11 work, as reflected in Shell’s internal records. (Id. at 14–15.) The settlement shares will be 12 allocated as follows: 50 percent for wage claims, 25 percent for interest, and 25 percent for 13 statutory penalties. (Id. at 15.) 14 Within 35 calendar days of the effective date of the settlement, the Settlement 15 Administrator will send settlement checks to class members. (Id. at 14.) The initial deadline to 16 cash the checks is 120 days after issuance. (Id. at 18–19.) The Settlement Administrator will send 17 a reminder to class members 60 days before the deadline. (Id. at 19.) Then, if uncashed checks 18 amount to more than $25,000, those funds will be redistributed among class members. If the 19 funds amount to less than $25,000, they will be distributed cy pres to the East Bay Community 20 Law Center (“EBCLC”). (Id.) 21 D. Release 22 Class members who do not timely opt out of the settlement, (see id. at 8, 17), release the 23 following: any and all claims against the Released Parties that were alleged in 24 the complaint brought in this Lawsuit and all claims that could have been brought based on the allegations in the operative Complaint, 25 related to payment of wages, penalties, interest, fees, costs, and all other claims and allegations made in the operative Complaint, from 26 June 4, 2015 through January 31, 2020 . . . . 27 (Id. at 21; see id. at 9–10 (defining “Released Parties” as Defendant and its privies).) The named 1 20–21.) 2 DISCUSSION 3 Plaintiffs seek preliminary approval to settle this case as both a Rule 23 class action and a 4 PAGA representative action. 5 I. CLASS ACTION SETTLEMENT APPROVAL 6 A class action settlement must be “fair, reasonable, and adequate,” Fed. R. Civ. P. 23(e)(2), 7 based on the following fairness factors: 8 (1) the strength of the plaintiff’s case; (2) the risk, expense, complexity, and likely duration of further litigation; (3) the risk of 9 maintaining class action status throughout the trial; (4) the amount offered in settlement; (5) the extent of discovery completed and the 10 stage of the proceedings; (6) the experience and views of counsel; (7) the presence of a governmental participant; and (8) the reaction of the 11 class members of the proposed settlement. 12 In re Bluetooth Headset Prods. Liab. Litig., 654 F.3d 935, 946 (9th Cir. 2011) (cleaned up). 13 However, the Court cannot fully assess these until the final approval hearing. Thus, at this stage 14 “a full fairness analysis is unnecessary,” Alberto v. GMRI, Inc., 252 F.R.D. 652, 665 (E.D. Cal. 15 2008) (cleaned up), and “the settlement need only be potentially fair,” Acosta v. Trans Union, 16 LLC, 243 F.R.D. 377, 386 (C.D. Cal. 2007). Preliminary approval is appropriate where “the 17 proposed settlement appears to be the product of serious, informed, non-collusive negotiations, has 18 no obvious deficiencies, does not improperly grant preferential treatment to class representatives 19 or segments of the class, and falls within the range of possible approval.” In re Tableware 20 Antitrust Litig., 484 F. Supp. 2d 1078, 1079 (N.D. Cal. 2007) (cleaned up). 21 Whether a settlement agreement has been negotiated before a class has been certified or 22 after, courts must also undertake an additional search for “subtle signs that class counsel have 23 allowed pursuit of their own self-interests and that of certain class members to infect the 24 negotiations.” Briseño v. Henderson, 998 F.3d 1014, 1023 (9th Cir. 2021) (applying Bluetooth’s 25 red-flag factors to post-class certification settlement approvals). Three such red-flag factors are: 26 (1) when counsel receives a disproportionate distribution of the settlement; 27 upon attorney’s fee; and 1 (3) when the agreement contains a “kicker” or “reverter” clause that 2 returns unawarded fees to the defendant, rather than the class. 3 Id. (cleaned up); see Bluetooth, 654 F.3d at 947. Here, none of the three red-flag factors is 4 applicable. Class counsel will seek a maximum of one-third of the settlement amount, there is no 5 clear sailing arrangement, and unawarded funds do not revert. (See Dkt. No. 171-1 at 13–14, 19.) 6 A. Settlement Process 7 The Court first considers “the means by which the parties arrived at settlement.” Harris v. 8 Vector Mktg. Corp., No. C-08-5198 EMC, 2011 WL 1627973, at *8 (N.D. Cal. Apr. 29, 2011). It 9 must be satisfied that the parties “have engaged in sufficient investigation of the facts to enable the 10 court to intelligently make an appraisal of the settlement.” Acosta, 243 F.R.D. at 396 (cleaned 11 up). Courts thus have “an obligation to evaluate the scope and effectiveness of the investigation 12 plaintiffs’ counsel conducted prior to reaching an agreement.” Id. 13 The process here was fair. The Settlement Agreement is the result of three separate 14 settlement conferences with Chief Magistrate Judge Spero over the course of more than a year. 15 See Satchell v. Fed. Exp. Corp., No. C 03–2659 SI, 2007 WL 1114010, at *4 (N.D. Cal. Apr. 13, 16 2007) (“The assistance of an experienced mediator in the settlement process confirms that the 17 settlement is non-collusive.”). Plaintiffs’ counsel went through extensive document production, 18 multiple depositions, and class certification. This factor weighs in favor of granting preliminary 19 approval. 20 B. Obvious Deficiencies 21 The parties twice amended their proposed class notice in response to the Court’s concerns. 22 At this stage, there are no obvious deficiencies in the Settlement Agreement, and this factor 23 weighs in favor of granting preliminary approval. 24 C. Preferential Treatment 25 The Court next examines whether the Settlement Agreement “improperly grant[s] 26 preferential treatment.” Tableware, 484 F. Supp. 2d at 1079. The only preferential treatment is 27 service awards to the four named Class Representatives, subject to Court approval. Such 1 for work done on behalf of the class [and] to make up for financial or reputational risk undertaken 2 in bringing the action.” Rodriguez v. W. Publ’g Corp., 563 F.3d 948, 958 (9th Cir. 2009) (cleaned 3 up). The service awards are within the range of possible approval, and this factor weighs in favor 4 of preliminary approval. See In re Online DVD-Rental Antitrust Litig., 779 F.3d 934, 943, 947 5 (9th Cir. 2015) (approving $5,000 service awards); Chu v. Wells Fargo Invs., LLC, Nos. C 05- 6 4526 MHP, C 06-7924 MHP, 2011 WL 672645, at *5 (N.D. Cal. Feb. 16, 2011) ($10,000). 7 D. Range of Possible Approval 8 The last inquiry focuses on “substantive fairness and adequacy” and considers Plaintiffs’ 9 “expected recovery balanced against the value of the settlement offer.” Tableware, 484 F. Supp. 10 2d at 1080 (cleaned up); see Harris, 2011 WL 1627973, at *11 (noting that courts “must estimate 11 the maximum amount of damages recoverable in a successful litigation and compare that with the 12 settlement amount” (cleaned up)). “[A] proposed settlement may be acceptable even though it 13 amounts only to a fraction of the potential recovery that might be available to class members at 14 trial.” Nat’l Rural Telecomms. Coop. v. DIRECTV, Inc., 221 F.R.D. 523, 527 (C.D. Cal. 2004); 15 see In re Mego Fin. Corp. Sec. Litig., 213 F.3d 454, 459 (9th Cir. 2000) (“[T]he Settlement 16 amount of almost $2 million was roughly one-sixth of the potential recovery, which, given the 17 difficulties in proving the case, is fair and adequate.”). 18 The Settlement Agreement is within the range of possible approval. Plaintiffs estimate 19 Shell’s total exposure is $8,550,000. (Dkt. No. 171-1 at 4.) The gross settlement fund of 20 $3,200,000 is about 37 percent of the total exposure. (See id.) Continued litigation brings a risk 21 Plaintiffs will receive nothing, especially because Plaintiffs’ claims are interconnected and 22 derivative of the same reporting time pay issue. This factor weighs in favor of preliminary 23 approval. 24 * * * 25 Each of the preliminary approval factors for Rule 23 class action settlements weighs in 26 favor of approval. See Tableware, 484 F. Supp. 2d at 1079. 27 II. PAGA REPRESENTATIVE ACTION SETTLEMENT APPROVAL 1 pursues “a dispute between an employer and the state LWDA on behalf of the state.” Iskanian v. 2 CLS Transp. L.A., LLC, 327 P.3d 129, 148 (Cal. 2014), abrogated by Viking River Cruises, Inc. v. 3 Moriana, 142 S. Ct. 1906 (2022). Accordingly, there are “fundamental differences between 4 PAGA actions and class actions.” Sakkab v. Luxottica Retail N. Am., Inc., 803 F.3d 425, 435 (9th 5 Cir. 2015) (cleaned up); see Arias v. Superior Court, 209 P.3d 923, 931 (Cal. 2009) (holding that 6 class certification is not required to pursue a PAGA action). 7 “[B]ecause a settlement of PAGA claims compromises a claim that could otherwise be 8 brought by the state,” courts must “review and approve any settlement.” Ramirez v. Benito Valley 9 Farms, LLC, No. 16-cv-04708-LHK, 2017 WL 3670794, at *2 (N.D. Cal. Aug. 25, 2017) (quoting 10 Cal. Lab. Code § 2699(l)(2)). Moreover, “[a] party seeking approval of a PAGA settlement must 11 simultaneously submit the proposed settlement to the [LWDA] to allow the LWDA to comment 12 on the settlement if the LWDA so desires.” Id. at *3. But “neither the California legislature, nor 13 the California Supreme Court, nor the California Courts of Appeal, nor the LWDA has provided 14 any definitive answer as to what the appropriate standard is for approval of a PAGA settlement.” 15 Jordan v. NCI Grp., Inc., No. EDCV 16-1701 JVS (SPx,) 2018 WL 1409590, at *2 (C.D. Cal. Jan. 16 5, 2018) (cleaned up). The LWDA has offered only this guidance: 17 It is thus important that when a PAGA claim is settled, the relief provided for under the PAGA be genuine and meaningful, consistent 18 with the underlying purpose of the statute to benefit the public and, in the context of a class action, the court evaluate whether the settlement 19 meets the standards of being fundamentally fair, reasonable, and adequate with reference to the public policies underlying the PAGA. 20 21 O’Connor v. Uber Techs., Inc., 201 F. Supp. 3d 1110, 1133 (N.D. Cal. 2016) (cleaned up). 22 Several district courts have applied a Rule 23-like standard, asking whether the settlement 23 is “fundamentally fair, adequate, and reasonable in light of PAGA’s policies and purposes.” 24 Jordan, 2018 WL 1409590, at *2 (collecting cases). Where PAGA claims are settled together 25 with Labor Code claims on behalf of a class, courts have also looked to the interplay of the two 26 recoveries to determine whether PAGA’s purposes have been served. The O’Connor court, for 27 instance, adopted a “sliding scale,” noting that “[b]y providing fair compensation to the class 1 of the class members as employees, but may have a deterrent effect upon the defendant employer 2 and other employers, an objective of PAGA.” 201 F. Supp. 3d at 1134. In other words, where the 3 settlement of Labor Code claims under Rule 23 provides “robust” relief to the class, it supports a 4 greater reduction in PAGA penalties. Viceral v. Mistras Grp., Inc., No. 15-cv-02198-EMC, 2016 5 WL 5907869, at *9 (N.D. Cal. Oct. 11, 2016). 6 Here, as discussed above, the Settlement Agreement provides robust relief for the class 7 members’ Labor Code claims. Additionally, the PAGA allocation represents about 11 percent of 8 Plaintiffs’ potential PAGA recovery at trial, and about 1.6 percent of the overall settlement 9 recovery. (Dkt. No. 171-1 at 4; see id. at 14.) Those proportions are reasonable and adequate. 10 See Haralson v. U.S. Aviation Servs. Corp., 383 F. Supp. 3d 959, 972–74 (N.D. Cal. 2019); e.g., 11 Van Kempen v. Matheson Tri-Gas, Inc., No. 15-cv-00660-HSG, 2017 WL 3670787, at *10 (N.D. 12 Cal. Aug. 25, 2017) (approving PAGA allocation of 1.4 percent of overall settlement recovery); 13 Slavkov v. Fast Water Heater Partners I, LP, No.14-cv-04324-JST, 2017 WL 3834873, at 14 *2 (N.D. Cal. July 25, 2017) (2.2 percent). 15 Accordingly, at the preliminary approval stage, Plaintiffs’ PAGA representative action 16 settlement is fair, adequate, and reasonable in light of PAGA’s purposes. 17 III. CLASS NOTICE PLAN 18 For any class certified under Rule 23(b)(3), class members must be afforded “the best 19 notice that is practicable under the circumstances, including individual notice to all members who 20 can be identified through reasonable effort.” Fed. R. Civ. P. 23(c)(2)(B). Such notice must clearly 21 state: (i) the nature of the action; (ii) the definition of the class certified; (iii) 22 the class claims, issues, or defenses; (iv) that a class member may enter an appearance through an attorney if the member so desires; (v) 23 that the court will exclude from the class any member who requests exclusion; (vi) the time and manner for requesting exclusion; and (vii) 24 the binding effect of a class judgment on members under Rule 23(c)(3). 25 26 Id. “Notice is satisfactory if it generally describes the terms of the settlement in sufficient detail to 27 alert those with adverse viewpoints to investigate and to come forward and be heard.” Churchill 1 The second amended proposed class notice includes each of the seven requirements above. 2 (Dkt. No. 180 at 13–19.) The parties have also done their due diligence in exploring email notice, 3 and the Court accepts their representation that email notice is not practicable under the 4 circumstances. (Dkt. Nos. 178, 180.) Overall, the second amended class notice plan is 5 appropriate. 6 IV. ATTORNEYS’ FEES 7 Rule 23(h) provides for an award of attorneys’ fees and costs in a certified class action 8 where it is “authorized by law or by the parties’ agreement.” Fed. R. Civ. P. 23(h). “[C]ourts 9 have an independent obligation to ensure that the award, like the settlement itself, is reasonable, 10 even if the parties have already agreed to an amount.” Bluetooth, 654 F.3d at 941. 11 Here, Plaintiffs plan to request $1,066,666.67 in attorneys’ fees, which is 33.33 percent of 12 the gross settlement fund. 25 percent of the common settlement fund is a “benchmark” for a 13 reasonable fee award, unless special circumstances warrant a departure. Id. at 942. At this stage, 14 the request is not so out of bounds as to warrant denying preliminary approval. Accordingly, 15 Plaintiffs shall file a motion for attorneys’ fees and costs within 21 days of this Order, (see Dkt. 16 No. 171 at 18), which the Court will separately assess along with any objections. See In re 17 Mercury Interactive Corp. Sec. Litig., 618 F.3d 988, 993–94 (9th Cir. 2010) (noting that Rule 18 23(h) “requires that any class member be allowed an opportunity to object to the fee motion”). 19 V. CY PRES AWARD 20 “District courts may approve settlements with cy pres provisions that affect only a portion 21 of the total settlement fund.” In re Google Inc. St. View Elec. Commc’ns Litig., 21 F.4th 1102, 22 1111 (9th Cir. 2021). Here, if uncashed or returned checks amount to less than $25,000, the 23 amount will be paid to EBCLC. That amount is only a small portion of the total settlement fund 24 and therefore the proposed cy pres award does not prevent preliminary approval. At the final 25 approval stage, the Court will assess whether the selected cy pres beneficiary is “tethered to the 26 nature of the lawsuit and the interests of the . . . class.” Dennis v. Kellogg Co., 697 F.3d 858, 867 27 (9th Cir. 2012) (cleaned up). 1 CONCLUSION 2 Plaintiffs’ motion for preliminary approval is GRANTED. The second amended proposed 3 || class notice is approved. (Dkt. No. 180 at 13-19.) The Court orders as follows: 4 1. Within 10 business days of this Order granting preliminary approval, Shell will provide 5 class members’ information to the Settlement Administrator; within 15 calendar days 6 thereafter, the Settlement Administrator will mail the approved class notice to class 7 members. (See Dkt. No. 171-1 at 16-18.) 8 2. When the Settlement Administrator mails out the class notice, Plaintiffs shall file a copy of 9 the final class notice with the Court. 10 3. Within 21 days of this Order, Plaintiffs shall file a motion for attorneys’ fees and costs. 11 (See Dkt. No. 171 at 18.) Shell may file an opposition within 14 days thereafter, and 12 Plaintiffs may file a reply within 7 days thereafter. 5 13 4. Plaintiffs shall file a motion for final settlement approval on February 16, 2023. 14 5. The Court will hear argument on the motion for attorneys’ fees and costs and the motion 3 15 for final settlement approval at the Final Approval Hearing, which will take place in person a 16 on March 30, 2023 at 9:00 a.m. 3 17 6. In light of the upcoming holidays, if the parties wish to adjust any of the above dates, they 18 shall submit a stipulation. The stipulation shall cite, with line numbers if applicable, the 19 portions of this Order, the Settlement Agreement (Dkt. No. 171-1 at 7-29), or the approved 20 class notice (Dkt. No. 180 at 13-19) that are affected by the stipulation. The parties shall 21 also ensure that before the approved class notice is sent to class members, it is amended to 22 reflect any dates that are changed by the stipulation (i.e., the date on which Plaintiffs will 23 file their motion for attorneys’ fees and costs; the date of the Final Approval Hearing). 24 || This Order disposes of Docket No. 171. 25 IT IS SO ORDERED. 26 Dated: December 14, 2022 27 Jats Set ly 28 JAGQUELINE SCOTT CORLEY United States District Judge