Murray v. Scelzi Enterprises, Inc

1 2 3 4 5 6 7 8 UNITED STATES DISTRICT COURT 9 FOR THE EASTERN DISTRICT OF CALIFORNIA 10 11 RODERICK MURRAY, an individual, on No. 1:18-cv-01492-LJO-SKO 12 behalf of the State of California, as a private attorney general, and on behalf of 13 all others similarly situated, FINDINGS AND RECOMMENDATION 14 Plaintiff, REGARDING PLAINTIFF’S MOTION FOR PRELIMINARY APPROVAL OF CLASS 15 v. ACTION SETTLEMENT 16 SCELZI ENTERPRISES, INC., a (Doc. 23) California Corporation; and DOES 1 to 50, 17 inclusive, 18 Defendant. 19 20 On August 27, 2019, Plaintiff Roderick Murray, individually and on behalf of all others 21 similarly situated (“Plaintiff”), filed an unopposed motion for preliminary approval of a class action 22 settlement. (Doc. 23.) The motion was referred to the undersigned magistrate judge for findings 23 and recommendation pursuant to 28 U.S.C. § 636(b). The undersigned reviewed Plaintiff’s papers 24 and all supporting material and found the matter suitable for decision without oral argument 25 pursuant to U.S. District Court for the Eastern District of California’s Local Rule 230(g). The 26 hearing set for October 9, 2019, was therefore VACATED. (Doc. 26.) 27 For the reasons set forth below, the Court RECOMMENDS that Plaintiff’s unopposed 1 motion for preliminary approval be DENIED without prejudice. 2 I. BACKGROUND 3 A. Factual and Procedural History 4 Defendant Scelzi Enterprises, Inc. (“Defendant” or “Scelzi”) designs and manufactures 5 truck bodies, including flatbeds, dump trucks, and water trucks, at its production facilities in 6 California. (Doc. 23 at 9.) Defendant employed Plaintiff as a “break press operator,” an hourly, 7 non-exempt employee. (Id.; Doc. 7 ¶ 6.) Plaintiff alleges that Defendant failed to have a lawful 8 rest period policy in place that informed its employees of their right to take duty-free rest periods 9 and to make rest breaks available to its employees. (Doc. 7 ¶ 17.) Instead, according to Plaintiff, 10 Defendant’s rest period policy mandated that its employees “adhere to specific rules during their 11 rest period,” including the “direct order that they ‘may not leave the work premises during the 12 rest period.’” (Id. ¶ 17.) Plaintiff also alleges that employees were required to “remain on-call 13 for any supervisorial instruction at any time” while on Defendant’s premises. (Id.) 14 Plaintiff filed this putative class and representative action on October 26, 2018, alleging 15 violations of California law. (Doc. 1.) On January 14, 2019, Defendant moved to dismiss 16 Plaintiff’s complaint. (Doc. 5.) Plaintiff filed his First Amended Complaint on January 31, 2019, 17 thereby mooting Defendant’s motion to dismiss. (Docs. 7, 10.) The First Amended Complaint, 18 which is the operative complaint in this action, alleges the following causes of action: (1) failure 19 to provide off-duty rest periods and/or pay rest break premiums, in violation of California Labor 20 Code § 226.7 and California Industrial Welfare Commission (IWC) Wage Orders; (2) failure to 21 issue accurate itemized wage statements, in violation of Labor Code §§ 226 and 226.3; (3) failure 22 to pay all wages due upon termination, in violation of Labor Code §§ 201, 202, and 203; (4) 23 violation of Business and Professions Code § 17200 et seq.; and (5) penalties under the Private 24 Attorneys General Act (PAGA), Labor Code § 2698 et seq. (Id.) 25 Shortly thereafter, the parties agreed to engage in informal discovery and participate in a 26 private mediation. (Doc. 23 at 10.) Prior to the mediation, the parties exchanged informal 27 discovery, including information about the size of the putative class, the total number of 1 policies. (Id.) On May 28, 2019, the parties participated in a private medication with mediator 2 Lisa Klerman. (Id.) The parties were unable to reach a settlement at the mediation but continued 3 to engage in settlement discussions. (Id.) 4 On June 7, 2019, Defendant filed a motion seeking to compel Plaintiff to submit his 5 individual claims to arbitration and to dismiss Plaintiff’s class and representative claims. (Doc. 6 18.) While Defendant’s motion to compel arbitration was pending, the mediator informed the 7 parties that a settlement had been reached. (Doc. 23 at 10.) The parties thereafter stipulated to 8 vacate the hearing on the motion to compel arbitration and executed the settlement agreement 9 currently before the Court (the “Proposed Settlement”). (Doc. 23-1.) 10 B. The Proposed Settlement 11 The Proposed Settlement includes the following key provisions: 12 1. Settlement Class Definition 13 For settlement purposes, the class is defined as “Plaintiff and all non-exempt hourly 14 individuals who are or were employed by Scelzi or its predecessor or merged entities in California 15 who were classified as non-exempt and who worked at least one shift longer than 3.5 hours at 16 any time from October 26, 2014 through the date upon which the Court grants preliminary 17 approval” (the “Settlement Class”). (Proposed Settlement § I.4, Doc. 23-1 at 33.) The Settlement 18 Class was estimated to include 682 members as of April 28, 2019. (Id.; Decl. of Craig J. 19 Ackermann ¶ 6, Doc. 23-1.) 20 2. Gross Settlement and Allocation 21 Under the Proposed Settlement, Defendant agrees to establish a non-reversionary gross 22 settlement fund of $350,000.00 (“Gross Settlement”). (Proposed Settlement § I.19, Doc. 23-1 at 23 35; Decl. of Craig J. Ackermann ¶ 3, Doc. 23-1.) The parties propose allocation of the Gross 24 Settlement as follows: 25 a. An amount not to exceed $116,666.66, one-third of the Gross Settlement, for class 26 counsel as attorney’s fees; 27 b. An amount not to exceed $14,000 for class counsel for costs and expenses; 1 named plaintiff 2 d. An amount estimated to be $15,000 to the third-party settlement administrator, CPT 3 Group, Inc.; and 4 e. A $35,000 PAGA penalty, 75 percent ($26,250) of which would be paid to the 5 California Labor and Workforce Development Agency (“LWDA”), and 25 percent 6 ($8,750) of which would be paid to the Settlement Class. 7 (Proposed Settlement §§ IV, V, VII.1, Doc. 23-1 at 41–44, 48; Decl. of Craig J. Ackermann ¶ 3, 8 Doc. 23-1; Decl. of Roderick Murray ¶ 9, Doc. 23-3.) 9 3. Net Settlement and Distribution 10 Accounting for all proposed distributions described above, Plaintiff estimates a net 11 settlement amount of $168,083.34 (“Net Settlement”). (Doc. 23 at 8; Decl. of Roderick Murray 12 ¶¶ 9–10, Doc. 23-3.) The parties propose distribution of the Net Settlement to Settlement Class 13 members who do not request exclusion from the class based on the number of verified weeks 14 worked during the class period. (Proposed Settlement § IV.3, Doc. 23-1 at 42; Decl. of Craig J. 15 Ackermann ¶ 48, Doc. 23-1.) No claim form submission is required for Settlement Class 16 members to receive their shares of the settlement. (Doc. 23 at 12; Decl. of Craig J. Ackermann ¶ 17 3, Doc. 23-1.) Any unpaid or unclaimed funds “will be disbursed subject to the provisions of 18 California Code of Civil Procedure § 384(b)(3).” (Proposed Settlement § VII.4, Doc. 23-1 at 50.) 19 4. Settlement Class Release 20 Settlement Class members who have not requested exclusion from the class each release 21 Defendant “and its predecessors, successors, assignees, current, former and future parents, 22 subsidiaries, affiliates, representatives, lawyers, insurers, reinsurers, accountants, agents, 23 partners, assigns, subrogees, officers, directors and employees” from “all claims, rights, demands, 24 liabilities, and/or causes of action and/or claims of every nature, whether known or unknown, that 25 were expressly asserted in the operative Complaint in the Action, or which could have been 26 alleged in the Complaint based upon or arising from the allegations in the Complaint.” (Proposed 27 Settlement §§ I.3, X.1, Doc. 23-1 at 32, 52.) The released claims 1 include claims for violation of the California Labor Code alleged in the operative Complaint and those arising from facts alleged in the operative Complaint, 2 including claims under Labor Code sections 201, 202, 203, 226, 226.7 or 2699 et seq., claims under California Business & Professions Code Section 17200 et seq. 3 based on the allegations and causes of action in the operative complaint, and the 4 applicable Industrial Welfare Commission Wage Orders based on the allegations and causes of action in the operative complaint, or any similar state or federal law, 5 statutory, constitutional, contractual or common law claims for wages, damages, unpaid costs or expenses, penalties, liquidated damages, interest, attorneys’ fees, 6 litigation costs, restitution, or equitable relief. 7 (Id. at 33.) 8 II. LEGAL STANDARDS 9 A. Preliminary Class Certification and Approval of Settlement Under Rule 23 10 Rule 23 mandates that, “[t]he claims, issues, or defenses of a certified class may be settled, 11 voluntarily dismissed, or compromised only with the court’s approval.” Fed. R. Civ. P. 23(e). 12 The following procedures apply to the court’s review of the proposed settlement: 13 The court must direct notice in a reasonable manner to all class members who 14 would be bound by the proposal . . . . 15 If the proposal would bind class members, the court may approve it only after a hearing and on finding that it is fair, reasonable, and adequate . . . . 16 The parties seeking approval must file a statement identifying any agreement made 17 in connection with the proposal. 18 [ . . . ] 19 Any class member may object to the proposal if it requires court approval under 20 this subdivision (e). 21 Id. 22 “Courts have long recognized that settlement class actions present unique due process 23 concerns for absent class members.” In re Bluetooth Headset Prods. Liab. Litig., 654 F.3d 935, 24 946 (9th Cir. 2011) (citation and internal quotations omitted). To protect the rights of absent 25 class members, Rule 23(e) requires that the court approve all class action settlements “only after 26 a hearing and on finding that it is fair, reasonable, and adequate.” Fed. R. Civ. P. 23(e)(2); 27 Bluetooth, 654 F.3d at 946. However, when parties seek approval of a settlement agreement negotiated prior to formal class certification, “there is an even greater potential for a breach of 1 fiduciary duty owed the class during settlement.” Bluetooth, 654 F.3d at 946. Thus, the court 2 must review such agreements with “a more probing inquiry” for evidence of collusion or other 3 conflicts of interest than what is normally required under the Federal Rules. Hanlon v. Chrysler 4 Corp., 150 F.3d 1011, 1026 (9th Cir. 1998), overruled on other grounds by Wal-Mart Stores, Inc. 5 v. Dukes, 564 U.S. 338 (2011); see also Lane v. Facebook, Inc., 696 F.3d 811, 819 (9th Cir. 6 2012). 7 Review of a proposed class action settlement ordinarily proceeds in three stages. See 8 MANUAL FOR COMPLEX LITIGATION (4th) § 21.632. First, the court conducts a preliminary 9 fairness evaluation and, if applicable, considers class certification. Second, if the court makes a 10 preliminary determination on the fairness, reasonableness, and adequacy of the settlement terms, 11 the parties are directed to prepare the notice of certification and proposed settlement to the class 12 members. Id. (noting that if the parties move for both class certification and preliminary approval, 13 the certification hearing and preliminary fairness evaluation can usually be combined). Third, 14 the court holds a final fairness hearing to determine whether to approve the settlement. Id.; see 15 also Narouz v. Charter Commc’ns, LLC, 591 F.3d 1261, 1266–67 (9th Cir. 2010). Though Rule 16 23 does not explicitly provide for such a procedure, federal courts generally find preliminary 17 approval of settlement and notice to the proposed class appropriate if the proposed settlement 18 “appears to be the product of serious, informed, non-collusive negotiations, has no obvious 19 deficiencies, does not improperly grant preferential treatment to class representatives or segments 20 of the class, and falls within the range of possible approval.” Lounibos v. Keypoint Gov’t Sols. 21 Inc., Case No. 12–cv–00636–JST, 2014 WL 558675, at *5 (N.D. Cal. Feb. 10, 2014) (quoting In 22 re Tableware Antitrust Litig., 484 F. Supp. 2d 1078, 1079 (N.D. Cal. 2007) ); see also NEWBERG 23 ON CLASS ACTIONS § 13:13 (5th ed. 2011); Dearaujo v. Regis Corp., Nos. 2:14-cv-01408-KJM- 24 AC, 2:14-cv-01411-KJM-AC, 2016 WL 3549473 (E.D. Cal. June 30, 2016) (“Rule 23 provides 25 no guidance, and actually foresees no procedure, but federal courts have generally adopted [the 26 process of preliminarily certifying a settlement class].”). 27 1. Preliminary Class Certification 1 four threshold requirements of Federal Rule of Civil Procedure 23(a): numerosity, commonality, 2 typicality, and adequacy of representation.” Leyva v. Medline Indus. Inc., 716 F.3d 510, 512 (9th 3 Cir. 2013) (citing Fed. R. Civ. P. 23(a)). If Rule 23(a)’s threshold requirements are met, the 4 proposed class must further satisfy Rule 23(b)(3)’s predominance and superiority requirements. 5 Fed. R. Civ. P. 23(b)(3); see Amchem Prods., Inc. v. Windsor, 521 U.S. 591, 615 (1997). 6 Whenever it reviews requests for class certification, the court “must pay ‘undiluted, even 7 heightened, attention’ to class certification requirements . . . .” Staton v. Boeing Co., 327 F.3d 8 938 at 952–53 (9th Cir. 2003) (citations omitted); see Berry v. Baca, No. CV 01-02069 DDP, 9 2005 WL 1030248, at *7 (C.D. Cal. May 2, 2005) (the parties cannot merely “agree to certify a 10 class that clearly leaves any one requirement unfulfilled”). The plaintiff bears the burden of 11 demonstrating that the requirements of Rule 23 have been satisfied as to the proposed class. See 12 Dukes, 564 U.S. at 350; Narouz, 591 F.3d at 1266. As the Supreme Court explained, 13 Rule 23 does not set forth a mere pleading standard. A party seeking class certification must affirmatively demonstrate his compliance with the Rule—that is, 14 he must be prepared to prove that there are in fact sufficient numerous parties, 15 common questions of law or fact, etc. We recognized in Falcon that “sometimes it may be necessary for the court to probe behind the pleadings before coming to rest 16 on the certification question,” and that certification is proper only if “the trial court is satisfied, after a rigorous analysis, that the prerequisites of Rule 23(a) have been 17 satisfied.” 18 Dukes, 564 U.S. at 350 (internal citations omitted) (italics in original). “A court that is not 19 satisfied that the requirements of Rule 23 have been met should refuse certification until [those 20 requirements] have been met.” Advisory Committee 2003 Note on Fed. R. Civ. P. 23(c)(1). 21 2. Preliminary Settlement Approval 22 As set forth above, a court may preliminarily approve a class action settlement under Rule 23 23(e) only if the settlement is fair, reasonable, and adequate. Bluetooth, 654 F.3d at 946. 24 “[P]reliminary approval of a settlement has both a procedural and substantive component.” See, 25 e.g., Tableware, 484 F. Supp. 2d at 1079 (citing Schwartz v. Dallas Cowboys Football Club, Ltd., 26 157 F. Supp. 2d 561, 570 n.12 (E.D. Pa. 2001)). In particular, preliminary approval of a 27 settlement and notice to the proposed class is only appropriate if: (i) the proposed settlement 1 “appears to be the product of serious, informed, non-collusive negotiations”; and (ii) the 2 settlement “falls within the range of possible approval,” has “no obvious deficiencies,” and does 3 not “improperly grant preferential treatment” to class representatives or segments of the class. 4 Id.; see also Ross v. Bar None Enters., Inc., No. 2:13–cv–00234–KJM–KJN, 2014 WL 4109592, 5 at *9 (E.D. Cal. Aug. 19, 2014). While it is not a court’s province to “reach any ultimate 6 conclusions on the contested issues of fact and law which underlie the merits of the dispute,” a 7 court should weigh, among other factors, the strength of a plaintiff’s case; the risk, expense, 8 complexity, and likely duration of further litigation; the extent of discovery completed; and the 9 value of the settlement offer. Chem. Bank v. City of Seattle, 955 F.2d 1268, 1291 (9th Cir. 1992); 10 see also Officers for Justice v. Civil Serv. Comm’n of City & Cty. of S.F., 688 F.2d 615, 625 (9th 11 Cir. 1982). 12 III. DISCUSSION 13 A. Rule 23(a) Requirements 14 1. Numerosity 15 The numerosity requirement is satisfied where “the class is so numerous that joinder of all 16 members is impracticable.” Fed. R. Civ. P. 23(a)(1). This requires the Court to consider “specific 17 facts of each case and imposes no absolute limitations.” General Tel. Co. v. EEOC, 446 U.S. 18 318, 330 (1980). Courts interpreting the numerosity requirement have identified a variety of 19 factors relevant to whether joinder of all class members would be impracticable including: (1) the 20 number of individual class members; (2) the ease of identifying and contacting class members; 21 (3) the geographical spread of class members; and (4) the ability and willingness of individual 22 members to bring claims, as affected by their financial resources, the size of the claims, and their 23 fear of retaliation in light of an ongoing relationship with the defendant. See, e.g., Twegbe v. 24 Pharmaca Integrative Pharm., Inc., No. CV 12-5080 CRB, 2013 WL 3802807, at *2 (N.D. Cal. 25 July 17, 2013). 26 Here, Plaintiff asserts that, based on information supplied by Defendant prior to mediation, 27 there are approximately 682 members in the Settlement Class. (Decl. of Craig J. Ackermann ¶ 6, 1 Defendant and can be easily identified through Defendant’s records. (Id. at ¶ 39.) Because the 2 joinder of 682 plaintiffs would be impracticable, the Court finds that this showing with respect to 3 numerosity is adequate to meet the requirements of Rule 23(a)(1). See, e.g., Collins v. Cargill 4 Meat Sols. Corp., 274 F.R.D. 294, 300 (E.D. Cal. 2011) (“Courts have routinely found the 5 numerosity requirement satisfied when the class comprises 40 or more members.”). 6 2. Commonality 7 The commonality requirement of Rule 23(a)(2) is met where “the class members’ claims 8 ‘depend upon a common contention’ such that ‘determination of its truth or falsity will resolve 9 an issue that is central to the validity of each [claim] with one stroke.’” Mazza v. Am. Honda 10 Motor Co., 666 F.3d 581, 588 (9th Cir. 2012) (quoting Dukes, 564 U.S. at 350). Thus, a plaintiff 11 seeking to certify a class must “demonstrate ‘the capacity of classwide proceedings to generate 12 common answers’ to common questions of law or fact that are ‘apt to drive the resolution of the 13 litigation.’” Id. (quoting Dukes, 564 U.S. at 350, (internal quotation and citation omitted) ). 14 “[C]ommonality only requires a single significant question of law or fact.” Id. at 589 (citation 15 omitted). “The existence of shared legal issues with divergent factual predicates is sufficient, as 16 is a common core of salient facts coupled with disparate legal remedies within the class.” Hanlon, 17 150 F.3d at 1019. So long as there are common questions of law or fact that are susceptible to 18 resolution by common proof, Rule 23(a)(2)’s commonality requirement is met. Cf. Dukes, 564 19 U.S. at 353 (finding insufficient commonality where “significant proof that Wal-Mart operated 20 under a general policy of discrimination” was “entirely absent”). 21 Plaintiff’s motion devotes a single sentence to the issue of commonality, stating that 22 “[w]hile the [p]arties dispute whether a [c]lass would be appropriate if the litigation were to 23 continue, they agree, for the purposes of settlement, that the [c]lass may be subject to common 24 rest break, wage statement, and waiting time practices.” (Doc. 23 at 16 (citing Decl. of Craig J. 25 Ackermann ¶ 40, Doc. 23-1).) While commonality can exist where a defendant has a uniformly- 26 applied on-duty break policy or practice that allegedly violates California law, see, e.g., Abdullah 27 v. U.S. Sec. Assocs., Inc., 731 F.3d 952, 961–63 (9th Cir. 2013), the parties’ assertion that the 1 demonstrate commonality. Plaintiff has submitted no evidence demonstrating the existence of 2 any “common rest break, wage statement, and waiting time practices” or the applicability of such 3 practices in a manner such that class-wide liability could be determined by facts common to all 4 members of the Settlement Class. See Dukes, 564 U.S. at 350. Without a more detailed and 5 factually-supported elaboration regarding the practices alleged in the First Amended Complaint 6 and the application of those practices to the Settlement Class, the undersigned cannot conclude 7 that there are no “dissimilarities within the proposed class” that “have the potential to impede the 8 generation of commons answers.” Id. (citation and internal quotation marks omitted). Because 9 Plaintiff has not yet shown that class treatment will generate common answers apt to drive the 10 resolution of the litigation, the requirement of commonality is not met. 11 3. Typicality 12 Rule 23(a)(3) requires that “the claims or defenses of the representative parties are typical 13 of the claims or defenses of the class [.]” Typicality “refers to the nature of the claim or defense 14 of the class representative, and not to the specific facts from which it arose or the relief sought.” 15 Ellis v. Costco Wholesale Corp., 657 F.3d 970, 984 (9th Cir. 2011). Typicality, in other words, 16 tests “whether other members have the same or similar injury, whether the action is based on 17 conduct which is not unique to the named plaintiffs, and whether other class members have been 18 injured by the same course of conduct.” Hanon v. Dataproducts Corp., 976 F.2d 497, 508 (9th 19 Cir. 1992) (quoting Schwartz v. Harp, 108 F.R.D. 279, 282 (C.D. Cal. 1985)). Part of the 20 controlling concern is whether “there is a danger that absent class members will suffer if their 21 representative is preoccupied with defenses unique to it.” Id. The “commonality and typicality 22 requirements occasionally merge: ‘Both serve as guideposts for determining whether under the 23 particular circumstances maintenance of a class action is economical and whether the named 24 plaintiff’s claim and the class claims are so interrelated that the interests of the class members 25 will be fairly and adequately protected in their absence.’” Parsons v. Ryan, 754 F.3d 657, 685 26 (9th Cir. 2014) (quoting Dukes, 564 U.S. at 349 n.5). 27 Plaintiff contends that the typicality requirement is satisfied because he “asserts rest break 1 are common and at the core of this lawsuit.” (Doc. 23 at 16 (citing Decl. of Craig J. Ackermann 2 ¶ 40, Doc. 23-1).) This bare contention does not establish that Plaintiff’s experience with 3 Defendant is typical or that the putative class injuries are “based on conduct which is not unique 4 to the named plaintiff[].” Further, as explained above with respect to commonality, Plaintiff has 5 not provided any evidence that members of the Settlement Class were injured by the same course 6 of conduct by Defendant. Indeed, the First Amended Complaint appears to belie that contention, 7 as Defendant’s conduct in the First Amended Complaint is alleged to have affected some 8 members of the Settlement Class and not others. See Doc. 7 ¶¶ 48 (alleging that Defendant’s 9 conduct caused “subclass members” to incur economic damages). Accordingly, Plaintiff has 10 failed to show the typicality requirement is met in this case. 11 4. Adequacy of Representation 12 To fulfill the adequacy requirement, the named plaintiff must “fairly and adequately protect 13 the interests of the class.” Fed. R. Civ. P. 23(a)(4). To determine whether the named plaintiff 14 will adequately represent the class, courts ask two questions: “(1) do the named plaintiffs and 15 their counsel have any conflicts of interest with other class members and (2) will the named 16 plaintiffs and their counsel prosecute the action vigorously on behalf of the class?” Hanlon, 150 17 F.3d at 1020. Indicia of adequacy include, “among other factors, an absence of antagonism 18 between representatives and absentees, and a sharing of interest between representatives and 19 absentees.” Ellis, 657 F.3d at 985 (citations omitted). Review of the adequacy of representation 20 is “especially critical when the class settlement is tendered along with a motion for class 21 certification.” Hanlon, 150 F.3d at 1020. 22 Plaintiff states that his counsel “both separately and together, have significant experience 23 litigating class actions and have been certified by numerous state and federal courts as competent 24 and adequate class counsel, including in a number of on-premises rest break class actions.” (Doc. 25 No. 23 at 17 (citing Decl. of Craig J. Ackermann ¶¶41, 54–67, Doc. 23-1; Decl. of Jonathan 26 Melmed ¶¶ 4–8, Doc. 23-1).) The “qualifications of counsel for the representatives” is, in fact, 27 one of several factors that the court must consider to determine adequacy, Brown v. Ticor Title 1 Plaintiff’s counsel is competent to prosecute the action. 2 The undersigned is more concerned, however, about the named Plaintiff and his counsel’s 3 ability to fairly and adequately protect the class. “[A] class representative must be part of the 4 class and possess the same interest and injury as the class members.” Amchem, 521 U.S. at 626 5 (internal citations omitted). Based on the information submitted, it is not clear that Plaintiff is an 6 adequate representative of the class, nor that the potential class members have suffered the same 7 injury as Plaintiff or possess same interests as Plaintiff. (See Section III.A.2 & 3, supra.) This is 8 particularly true with respect to Plaintiff’s claim for waiting time penalties under Cal. Labor Code 9 § 201 et seq., which applies only to Settlement Class members whose employment with 10 Defendant ended during the class period. There is no evidence in the record from which the 11 undersigned can conclude Plaintiff falls within this category. In any event, given the potential 12 for current- and former-employee Settlement Class members to have divergent interests, 13 subclasses with separate representatives may be necessitated to adequately protect these 14 members’ respective interests. See MANUAL FOR COMPLEX LITIGATION (4th) § 21.123. In fact, 15 as observed above, the First Amended Complaint contemplates the certification of “subclasses” 16 in this case. See, e.g., Doc. 7 ¶ 44, 54. 17 Even if Plaintiff does demonstrate he meets all of the characteristics of the Settlement Class 18 members, however, questions still remain as to Plaintiff’s ability to adequately represent the 19 Settlement Class. The undersigned is puzzled, if not troubled, by Plaintiff’s statement in his 20 declaration that “I understand that my duties as the Class representative are to look out for the 21 interests of the other drivers in this case both in any settlement any [sic] litigation as a whole.”1 22 (Decl. of Roderick Murray ¶ 2) (emphasis added). Yet Plaintiff is alleged to have been employed 23 by Defendant during the class period as a “break press operator,” see Doc. 7 ¶ 6, Doc. 23 at 9, 24 Decl. of Roderick Murray ¶ 4, and Defendant is alleged to be in the business of designing and 25 manufacturing truck bodies, see Doc. 23 at 9; Decl. of Craig J. Ackermann ¶ 4. Thus, it does not 26 1 The declaration of Plaintiff’s counsel contains a similar reference to “drivers,” without any factual support. (See 27 Decl. of Craig Ackermann ¶ 39 (“Defendant has informed Plaintiff’s counsel that the proposed class consists of approximately 682 current and former drivers who can be readily identified through Defendant’s records, as of the 1 appear Plaintiff held the position of “driver” while employed by Defendant during the class 2 period, nor is it clear that Defendant employed any “drivers” or why they would comprise part of 3 the Settlement Class. While this discrepancy may simply be typographical, it nevertheless 4 underscores the necessity of close judicial scrutiny of pre-certification settlement agreement to 5 ensure that divergent interests amongst class members are considered and accommodated and 6 that the named plaintiff and counsel fairly and adequately represent the interests of all class 7 members. Hanlon, 150 F.3d at 1026. Based on the record before the undersigned, the court 8 cannot find that Rule 23(a)(4)’s adequacy requirement has been met in this case. 9 In sum, as Plaintiff has failed to show commonality, typicality, or adequacy of 10 representation, the undersigned finds Plaintiff has not satisfied Rule 23(a)’s prerequisites. 11 B. Rule 23(b) Requirements 12 Plaintiff seeks certification under Rule 23(b)(3), which requires that “the questions of law 13 or fact common to class members predominate over any questions affecting only individual 14 members, and that a class action is superior to other available methods for fairly and efficiently 15 adjudicating the controversy.” Fed. R. Civ. P. 23(b)(3); see also Amchem, 521 U.S. at 615. The 16 test of Rule 23(b)(3) is “far more demanding,” than that of Rule 23(a). Wolin v. Jaguar Land 17 Rover N. Am., LLC, 617 F.3d 1168, 1172 (9th Cir. 2010) (quoting Amchem, 521 U.S. at 623–24). 18 1. Predominance 19 The “predominance inquiry tests whether proposed classes are sufficiently cohesive to 20 warrant adjudication by representation.” Amchem, 521 U.S. at 623. Predominance is a similar 21 inquiry to commonality but requires a heightened showing that facts and issues common to the 22 class predominate over any individual issues that might be present. See Fed. R. Civ. P. 23(b)(3); 23 Hanlon, 150 F.3d at 1019. The main concern is the “balance between individual and common 24 issues.” Mevorah v. Wells Fargo Home Mortg. (In re Wells Fargo Home Mortg. Overtime Pay 25 Litig.), 571 F.3d 953, 959 (9th Cir. 2009). Rule 23(b)(3) requires a showing that “questions 26 common to the class predominate, not that those questions will be answered, on the merits, in 27 favor of the class.” Amgen Inc. v. Connecticut Ret. Plans & Trust Funds, 568 U.S. 455, 459 1 Plaintiff seeks to certify a settlement class with respect to his cause of action for rest period 2 violations, non-compliant wage statements, waiting time penalties, and unfair business practices. 3 (See generally Doc. 23.) An internal policy alone will not satisfy the predominance inquiry. See 4 Vinole v. Countrywide Home Loans, Inc., 571 F.3d 935, 946 (9th Cir. 2009) (stating “a district 5 court abuses its discretion in relying on an internal uniform exemption policy to the near exclusion 6 of other factors relevant to the predominance inquiry”); Ordonez v. Radio Shack, Inc., No. CV 7 10–7060–CAS (JCGx), 2013 WL 210223, at *11 (C.D. Cal. Jan. 17, 2013). Rather, that policy 8 must be “consistently applied to a group of employees is in violation of the wage and hour laws” 9 in order to be found suitable for class treatment. Brinker Rest. Corp. v. Superior Court, 53 Cal. 10 4th 1004, 1033 (2012) (emphasis added). The Court must determine whether Defendant’s 11 policies or practices were consistently applied such that “questions common to the class 12 predominate” Plaintiff’s claims. See Amgen, 568 U.S. at 459. 13 a. Rest Period Policy 14 Plaintiff contends that “common issues predominate with respect to [his] claims that 15 Defendant promulgated an unlawful on-premises rest break policy.” (Doc. 23 at 17.) He alleges 16 in his First Amended Complaint that Defendant’s rest policy violates California law because it 17 “advised Plaintiff, the Class Members, and all Aggrieved Employees to take rest breaks on-site 18 and to remain on duty during their rest periods,” citing Augustus v. ABM Security Services, Inc., 19 2 Cal. 5th 257, 269 (2016).2 (Doc. 7 ¶¶ 17, 19.) 20 In Augustus, the California Supreme Court held that “during rest periods[,] employers must 21 relieve employees of all duties and relinquish control over how employees spend their time.” 2 22 Cal. 5th 257, 269 (2016). Plaintiff has submitted no evidence of a policy or practice under which 23 Defendant’s employees were uniformly subject to employer control during their rest breaks.3 To 24 2 Under California law, an employer must provide rest periods in accordance with applicable statutes, regulations, 25 and IWC Wage Orders. Cal. Lab. Code § 226.7(b). The applicable IWC Wage Order provides that the rest period “shall be based on the total hours worked daily at the rate of ten (10) minutes net rest time per four (4) hours or major fraction thereof,” unless the total work time is less than three and one-half hours. IWC Wage Order No. 1-2001. 26 3 The undersigned expresses no opinion as to whether Defendant’s alleged rest break policy violates California law in view of the California Supreme Court’s holding in Augustus. While the court looks to the merits of a plaintiff's 27 underlying claim to determine whether predominance exists for the purposes of Rule 23, it does not, at this stage, “judge the validity of [plaintiffs’] claims.” United Steel, Paper & Forestry, Rubber, Mfg. Energy, Allied Indus. & 1 the contrary, it appears that Defendant’s “on-premises rest policy” was not uniformly applied. 2 Plaintiff himself points out in the motion that “[a]t mediation, Defendant’s counsel produced 3 approximately one hundred declarations from [Settlement] Class [m]embers stating that they 4 could, in fact, leave the premises during their rest breaks and suggested that they could probably 5 obtain signed declarations for at least one quarter of the [Settlement] Class.” (Doc. 23 at 23, 25, 6 26; see also Decl. of Craig J. Ackermann ¶ 30.) In the absence of any evidence showing a uniform 7 policy or practice, as these declarations suggest, identifying rest period violations would likely 8 require an individual analysis. The Court would have to ascertain whether Defendant took 9 measures to require an employee to remain on site, the nature of such measures, and whether the 10 employee chose to remain on site for reasons other than those measures. See, e.g., Vazquez v. 11 Kraft Heinz Foods Co., Case No. 16-cv-2749-WQH-BLM, 2018 WL 4896072, at *12 (S.D. Cal. 12 Oct. 9, 2018) (denying motion to certify rest period subclass where the record contained “no 13 evidence of a policy limiting the movements of the employees during the rest periods.”); Ritenour 14 v. Carrington Mortg. Servs., LLC, No. SACV 16-02011-CJC(DFMx), 2018 WL 5858658, at *8 15 (C.D. Cal. Sept. 12, 2018) (finding no predominance where the plaintiffs failed to show the 16 defendant had an on-site rest period policy that was facially invalid under Augustus or one that 17 was applied uniformly to the putative class members). See also Dawson v. Hertz Transporting, 18 Inc., Case No. CV 17-8766-GW(JEMx), 2018 WL 6112623, at *7 (C.D. Cal. Nov. 5, 2018); 19 Schroeder v. Envoy Air, Inc., No. CV 16-4911-MWF (KSx), 2017 WL 3835804, at *10 (C.D. 20 Cal. Aug. 30, 2017) (denying class certification, finding “[t]he evidence of any on-call policy by 21 Envoy is equivocal at best and . . . . apparently will require the taking of individualized testimony 22 by numerous employees and higher-ups in the company. Even if the existence of the policy were 23 to present a common question, Plaintiffs cannot meet the predominance requirement because 24 proving up Plaintiffs’ claims would overwhelm the Court with individualized issues.”). 25 of class certification because “the district court not only ‘judge[d] the validity” of plaintiffs’” on duty” claims, it did so using a nearly insurmountable standard, concluding that merely because it was not assured that plaintiffs would 26 prevail on their primary legal theory, that theory was not the appropriate basis for the predominance inquiry.”). See also Amgen, 568 U.S. at 466 (“Rule 23 grants courts no license to engage in free-ranging merits inquiries at the 27 certification stage . . . . Merits questions may be considered to the extent—but only to the extent—that they are relevant to determining whether the Rule 23 prerequisites . . . . are satisfied.”). 1 As discussed above with respect to commonality, without any “heightened showing” of the 2 existence of a uniformly-applied on-duty rest break policy or practice, cf. Wright v. Renzenberger, 3 Inc., Case No. CV 13-6642 FMO (AGRx), 2017 WL 9831398, at *5 (C.D. Cal. Sept. 30, 2017) 4 (finding typicality and certifying class where the plaintiffs “provided substantial evidence that, 5 as a matter of uniform policy,” the defendant instructed employees to take rest breaks while on 6 premises and “counted” that time as rest periods), the undersigned cannot at this time conclude 7 that Plaintiff’s rest period claim is appropriate for classwide resolution. 8 b. Wage Statements, Waiting Time Penalties, and Unfair Business Practices 9 Plaintiff also seeks to certify a settlement class with respect to his wage statement claim 10 (Labor Code §§ 226 and 226.3), waiting time penalties (Labor Code §§ 201, 202, and 203), and 11 unfair business practices claim (Business and Professions Code § 17200 et seq.). (See generally 12 Doc. 23.) Plaintiff concedes in his motion that these claims are “derivative” of his rest break 13 claim. (Id. at 16, 21, 25 (characterizing Plaintiff’s waiting time penalty and wage statement 14 claims as “premised on Defendant’s on-premises rest break policy and failure to pay rest break 15 premiums.”).) Because the rest period claim will require individualized inquiry, so will these 16 derivative claims. See Ritenour, 2018 WL 5858658, at *9–10; Burnell v. Swift Transp. Co. of 17 Ariz., LLC, EDCV 10–809–VAP (SPx), 2016 WL 2621616, at *5 (C.D. Cal. May 4, 2016) 18 (finding that “wage statement claim, . . . § 203 claim, and UCL claim are derivative of . . . meal 19 and rest period claims and cannot be adjudicated on a class basis for the same reasons”). This is 20 particularly true in the case of the waiting time penalty claim, which is only relevant to members 21 of the Settlement Class who no longer work for Defendant; it does not apply to those class 22 members who are currently employees. See Roberts v. Marshalls of CA, LLC, Case No. 13-cv- 23 04731-MEJ, 2017 WL 1152967, at *10 (N.D. Cal. Mar. 28, 2017) (finding class certification 24 pursuant to Rule 23(b)(3) not warranted where “[d]ifferent class members seek different relief by 25 virtue of their status as either a managerial or non-managerial employee or as a current or former 26 employee.”). 27 2. Superiority 1 methods for the fair adjudication of the controversy.” Fed. R. Civ. P. 23(b)(3). In resolving the 2 Rule 23(b)(3) superiority inquiry, the court should consider “(A) the class members’ interests in 3 individually controlling the prosecution or defense of separate actions; (B) the extent and nature 4 of any litigation concerning the controversy already begun by or against class members; (C) the 5 desirability or undesirability of concentrating the litigation of the claims in the particular forum; 6 and (D) the likely difficulties in managing a class action.” Id.; see Amchem, 521 U.S. at 616. 7 Where the parties have agreed to pre-certification settlement, however, there is no need to 8 consider the “likely difficulties in managing a class action.” Amchem, 521 U.S. at 620. Rather, 9 the focus shifts to those requirements that are “designed to protect absentees by blocking 10 unwarranted or overbroad class definitions.” Id. 11 Plaintiff asserts “the superiority requirement is satisfied because it would be highly 12 inefficient for 682 Class Members to file individual cases; certification will provide the Class 13 with a viable method of obtaining redress for their relatively modest individual damages; and 14 public policy supports the use of the class action device to secure the enforcement of statutes that 15 focus on the workplace.” (Doc. 23 at 18.) While the consolidation of approximately 682 potential 16 individual actions into a single proceeding would undoubtedly enable a more efficient 17 management of this litigation, Plaintiff’s motion fails to consider that, in addition to litigation, 18 arbitration is also a potential means to adjudicate the dispute (at least according to Defendant, see 19 Doc. 18). There is no mention—much less analysis—of how a class action is superior to 20 arbitration in this case, particularly where arbitration could be conducted on behalf of multiple 21 claimants at one time and is typically less costly and more efficient than litigation. 22 In sum, based on the foregoing analysis, the undersigned finds that Plaintiff also has not 23 met his burden under Rule 23(b)(3). 24 C. Preliminary Fairness Determination 25 Plaintiff contends the court’s scrutiny for purposes of preliminary approval of the settlement 26 “should be ‘limited to the extent necessary to reach a reasoned judgment that the agreement is 27 not the product of fraud or overreaching by, or collusion between, the negotiating parties and that 1 18 (quoting Officers for Justice, 668 F.3d at 625).) But, as this Court recently has clarified, it 2 agrees with the observation of another California district court, that “the idea that district courts 3 should conduct a more lax inquiry at the preliminary approval stage seems wrong” and lacks a 4 compelling rationale. Cotter v. Lyft, Inc., 193 F. Supp. 3d 1030, 1036 (N.D. Cal. 2016). Rather, 5 in light of the court’s duty to absent class members, this court opts to “review class action 6 settlements just as carefully at the initial stage as [it] do[es] at the final stage.” Id. at 1037; see 7 Smothers v. Northstar Alarm Servs., LLC, No. 2:17-cv-00548-KJM-KJN, 2019 WL 280294, at 8 *10 (E.D. Cal. Jan. 22, 2019). 9 Under Rule 23(e), a court may approve a class action settlement only if the settlement is 10 fair, reasonable, and adequate. Fed. R. Civ. P. 23(e)(2); Bluetooth, 654 F.3d at 946. Although 11 the court must weigh several factors to approve a settlement, additional factors may be relevant 12 depending on the context of the case and the terms of the agreement. See Bluetooth, 654 F.3d at 13 946 (“The factors in a court’s fairness assessment will naturally vary from case to case . . . .). 14 Here, the undersigned is troubled by several aspects of the Proposed Settlement that cast doubt 15 on its fairness, as explained below. 16 1. Valuation of the Settlement 17 In calculating the maximum potential recovery for the class, Plaintiff’s counsel declares that 18 the total potential recovery for the rest break claim is $4,286,490; the total for the “waiting time 19 penalties” is $1,120,080; the total for the “wage statement penalties” is $1,927,000; and the total 20 PAGA penalties is $3,143,940. (Decl. of Craig J. Ackermann ¶¶ 21, 23, 25, 28.) The sum of 21 these amounts equals $10,477,510. The Gross Settlement here is for $350,000—just 3.3 percent 22 of the total potential recovery for Plaintiff’s claims. When the total potential recovery is 23 compared to the estimated Net Settlement of $168,083.34, that percentage drops to 1.6. While 24 Plaintiff defends the Gross Settlement amount as “more than 100% of the risk-adjusted settlement 25 value of the claims” (Doc. 23 at 28), review of Plaintiff’s methodology, which results in these 26 low percentages, demonstrates that the calculation of such risk-adjusted settlement value suffers 27 from serious problems, such that the undersigned cannot find that the Proposed Settlement is fair 1 a. Rest Break Claim 2 Plaintiff’s counsel declares Defendant’s “maximum exposure” on his rest break claim is 3 $4,286,490. (Decl. of Craig J. Ackermann ¶ 21.) According to Plaintiff, considering Defendant’s 4 factual and legal arguments, Defendant’s “realistic, risk-adjusted exposure” amounts to 5 $108,501.77. (Id. ¶ 38.) Among the various “discounts” applied to the potential value of 6 Plaintiff’s rest break claim is an 85 percent reduction “to account for the risk of Defendant 7 compelling Plaintiff’s case to individual arbitration.” (Doc. 23 at 23.) As Plaintiff acknowledges, 8 Defendant has taken the position in this litigation that Plaintiff and the Settlement Class have 9 signed individual arbitration agreements with class action waivers. (Id. See also Doc. 18 10 (Defendant’s motion to compel arbitration).) Plaintiff asserts that “[i]f enforced by the Court, 11 these arbitration agreements would eliminate all of the claims at issue other than Plaintiff’s PAGA 12 penalty claims (which are not subject to arbitration), as all other claims would be compelled to 13 individual arbitration.” (Doc. 23 at 23.) Thus, “[t]he arbitration agreements for all Class 14 Members [] posed a very serious risk of recovery and could have (and potentially would have) 15 wiped out all claims, except for PAGA penalty claim.” Id. Plaintiff further asserts an additional 16 25 percent discount to account for the risk that the Court would deny class certification in this 17 case, similarly asserting that this would eliminate all of the Settlement Class members’ claims. 18 (Id. at 25.) 19 In reducing the potential value of his rest break claim in this way, Plaintiff conflates the 20 Settlement Class members’ ability to litigate claims with Defendant’s potential exposure for that 21 claim. Plaintiff assumes that in event the Settlement Class members are not able to pursue their 22 rest break through a class action, that claim has been effectively “wiped out,” discounting the 23 value of these claims to zero. This, however, fails to account for the potential for individual 24 Settlement Class members to pursue their respective rest break claims in arbitration or in 25 individual lawsuits. Plaintiff has provided no support for the assumption that, in the event the 26 claims cannot be adjudicated through a class action, they have no value.4 Without any analysis 27 4 In the case of arbitration, the Court notes that the arbitration agreement at issue provides that Defendant will bear the costs of the arbitration, see Doc. 18-2 at 8, thereby potentially increasing the likelihood that more Settlement Class 1 as to the number of Settlement Class members who would potentially proceed with their rest 2 break claims individually, the undersigned cannot determine whether the Proposed Settlement is 3 reasonable as to that claim. 4 b. Wage Statement Claim and Waiting Time Penalties 5 Plaintiff asserts that Defendant’s maximum exposure for Plaintiff’s wage statement claim 6 and waiting time penalties is $1,927,000 and $1,120,080, respectively. (Doc. 23 at 20–21; Decl. 7 of Craig J. Ackermann ¶¶ 21, 25, Doc. 23-1.) Yet Plaintiff assigns no value to these claims in 8 settlement. (See Doc. 23 at 25–26; Decl. of Craig J. Ackermann ¶¶ 26, 38, Doc. 23-1) Some of 9 purported justifications for deeming these claims valueless are predicated on the same 10 unsupported assumption identified above. (See Doc. 23 at 25 (these claims “would be subject to 11 Defendant’s individual arbitration agreements with Class Members, thus rendering them largely 12 worthless in litigation.” (emphasis added).) Others are based on admittedly unsettled law. (See 13 id. at 26 (asserting that the derivative claims have no value because there is a risk they could not 14 be maintained in the absence of injury, yet also noting that “[t]his is an open issue under California 15 law with the law in flux.”) It does not follow from any of these justifications that these claims 16 should be discounted to zero. 17 Moreover, these claims are inappropriate to include in the Proposed Settlement in the 18 current version. As set forth above, the waiting time penalty claim is only relevant to members 19 of the Settlement Class who no longer work for Defendant. Since it is unclear whether Plaintiff 20 falls within that group, it cannot be said that he is adequately situated to litigate, much less release, 21 that claim. Moreover, alleging claims that Plaintiff believes are meritless and “largely worthless 22 in litigation” may violate Rule 11. See Fed. R. Civ. P. 11(b)(2) (noting legal contentions must be 23 “warranted by existing law or by a nonfrivolous argument for extending, modifying, or reversing 24 existing law or for establishing new law”). In any event, the undersigned cannot recommend the 25 approval of the settlement of the wage statement claim and waiting time penalties in the Proposed 26 Settlement as currently structured. 27 c. PAGA Claim 1 distributed amongst 682 class members. (Doc. 23 at 8.) In calculating the maximum potential 2 recovery for the class, Plaintiff’s counsel declares that the total potential recovery for the rest 3 break claim is $4,286,490; the total for the waiting time penalties is $1,120,080; the total for the 4 wage statement penalties is $1,927,000; and the total PAGA penalties is $3,143,940. (Decl. of 5 Craig J. Ackermann ¶¶ 21, 23, 25, 28.) While he sum of these amounts equals $10,477,510, 6 Plaintiff’s counsel reports the total potential recovery as $7,333,570, id. ¶ 28; see also Doc. 23 at 7 2. In so doing, counsel improperly omits the $3,143,940 estimated maximum potential value of 8 the PAGA claim. 9 The PAGA statute requires trial courts to “review and approve” any settlement of PAGA 10 claims. Cal. Lab. Code § 2699(l)(2).5 In the absence of authority governing the standard of 11 review of PAGA settlements, the LWDA has in one action provided some guidance to the court. 12 O’Connor v. Uber Techs., Inc., 201 F. Supp. 3d 1110, 1133 (N.D. Cal. 2016). There, where both 13 class action and PAGA claims were covered by a proposed settlement, the LWDA acknowledged 14 that it was “not aware any existing case law established a specific benchmark for PAGA 15 settlements, either on their own terms or in relation to the recovery on other claims in the action” 16 but stressed that: 17 [W]hen a PAGA claim is settled, the relief provided for under the PAGA be genuine and meaningful, consistent with the underlying purpose of the statute to benefit the 18 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 Id.; see also Sanchez v. Frito-Lay, Inc., No. 1:14-cv-00797-DAD-BAM, 2019 WL 4828775, at 21 *12 (E.D. Cal. Sept. 30, 2019). Recognizing the distinct issues presented by class actions, the 22 undersigned is persuaded by the LWDA’s reasoning expressed in O’Connor and therefore shall 23 evaluate the Proposed Settlement of PAGA claims according to whether the settlement terms (1) 24 meet the statutory requirements set forth by PAGA, and (2) are fundamentally fair, reasonable, 25 and adequate in view of PAGA’s public policy goals. See Sanchez, 2019 WL 4828775 at *12. 26 First, Plaintiff cites no authority that PAGA penalties should not be considered in the total 27 1 estimated value of the class claims. While the damages awarded under PAGA do not inure 2 entirely to the benefit of the class, courts have held that the full amount of the awardable penalties 3 should be considered in establishing the fairness of the settlement. “Just because the State would 4 receive [seventy-five percent of the penalty] doesn’t mean it’s not part of the penalty. To the 5 contrary, a PAGA plaintiff stands in the shoes of the State in enforcing its wage and hour laws.” 6 Cotter, 176 F. Supp. 3d at 942. “[I]t makes no sense to simply erase the State’s portion of the 7 recovery when estimating the maximum value of the claim.” Id. 8 Moreover, Plaintiffs seek to settle the PAGA claim for $35,000—75 percent paid to the 9 LWDA and 25 percent to the Settlement Class—despite asserting its maximum value is 10 $3,143,940. This $3,143,940 amount makes up 30 percent of the total verdict value of the case. 11 Yet Plaintiff proposes settling the PAGA claim for 1.1 percent of its estimated full worth. 12 Plaintiff offers no rationale for settling the PAGA claim for such a relatively meager value. See 13 O’Connor, 201 F. Supp. 3d at 1133–34 (rejecting a proposal to settle PAGA claims for $1 million 14 where counsel previously valued them at over $1 billion, noting the court’s concern that the 15 PAGA claim was being used “simply as a bargaining chip in obtaining a global settlement for 16 Uber’s benefit, even though the PAGA claim alone is worth more than half of the full verdict 17 value of all claims being released.”). Nor has Plaintiff established that a copy of the Proposed 18 Settlement was provided to the LWDA at the same time it was submitted to the Court, as required 19 by Cal. Lab. Code § 2699(l)(2). 20 Comparison of the $35,000 PAGA settlement to the alleged discounted value of those 21 claims further demonstrates its unreasonableness. Plaintiff’s counsel estimates the PAGA 22 penalties at a risk-adjusted value of $177,409.12. As justification for this significant, 70 percent 23 reduction from the $3,143,940 total value, Plaintiff points to the Court’s discretion to reduce the 24 amount of PAGA penalties, along with the fact that Plaintiff would not be able to recover PAGA 25 penalties if he were unable to prevail on his claims under the Labor Code. Both of these points 26 are correct: trial courts retain discretion concerning the amount of PAGA penalties to be awarded, 27 see Cal. Labor Code § 2699(e)(2) (noting “a court may award a lesser amount than the maximum 1 particular case, to do otherwise would result in an award that is unjust, arbitrary and oppressive, 2 or confiscatory”), and PAGA penalties would be unavailable were Plaintiff unable to prevail on 3 his claims for rest break violations, incorrect wage statements, and waiting time penalties, see id. 4 §2699(a). However, as explained above, the undersigned finds the assessment of the risk of 5 prevailing on Plaintiff’s Labor Code claims flawed, which renders excessive the 70 percent total 6 discount on the PAGA penalties. (See Doc. 23 at 27, 28.) Moreover, Plaintiff has not adequately 7 explained aspects of the 70 percent discount, such as how two separate deductions of 50 percent 8 under section 2699(e)(2) do not result in double counting.6 (See id. 26, 27.) 9 The above issues demonstrate that the total value of the PAGA penalties (and, in fact, all of 10 the claims) have been discounted in an amount in excess of what is reasonable. Apportioning 11 $35,000 of the Proposed Settlement toward PAGA claim that has a discounted value of 12 $177,409.12 (19.7 percent) may very well be reasonable; apportioning that same amount of the 13 Proposed Settlement toward PAGA claim that has a value of $3,143,940 (1.1 percent) is not. See 14 O’Connor, 201 F. Supp. 3d at 1134–35. The failure to adequately explain why the PAGA 15 penalties were not considered in the calculation of the total value of the suit and the overly- 16 excessive discounts on those penalties prevents the undersigned from any “real evaluation of the 17 reasonableness of this settlement.” See Gonzalez v. CoreCivic of Tennessee, LLC, No. 1:16-cv- 18 01891-DAD-JLT, 2018 WL 4388425, at *9 (E.D. Cal. Sept. 13, 2018). Accordingly, absent 19 further explanation by the parties, the undersigned declines to recommend for preliminary 20 approval the PAGA penalties called for in the Proposed Settlement as fair, reasonable, and 21 adequate. 22 d. Summary 23 In light of the foregoing, the undersigned cannot conclude that Plaintiff has made an 24 adequate showing sufficient to warrant a preliminary finding that the Proposed Settlement is fair, 25 reasonable, and adequate. As set forth above, the Gross Settlement amount here is for $350,000— 26 6 Plaintiff asserts that one of the 50 percent discounts is due to Defendant counsel’s representation that Defendant 27 was experiencing some “financial difficulties.” (Decl. of Craig J. Ackermann ¶ 37.) Plaintiff has not shown, however, that these unspecified financial difficulties would cause Defendant unable to pay PAGA penalties should liability be 1 just 3.3 percent of the total potential recovery for Plaintiff’s claims. Although it is true that a 2 settlement agreement amounting to a low percentage of the class’s potential recovery does not 3 render the agreement per se inadequate or unfair, see Officers for Justice, 688 F.2d at 628, the 4 settlement value as proposed appears to represent an overly-aggressive discounting of the claims 5 in this case. Procedurally, this raises concerns about whether Plaintiff’s counsel adequately 6 represented the interests of the absent putative class members in settlement negotiations and the 7 extent to which the Proposed Settlement is the product of a well-informed negotiation. 8 Substantively, such an aggressive discounting of the putative class’s claims presents an 9 impediment to the fairness and reasonableness determination. To address whether a proposed 10 settlement is substantively fair or adequate, courts must “consider plaintiffs’ expected recovery 11 balanced against the value of the settlement offer.” Tableware, 484 F. Supp. 2d at 1080. Here, 12 Plaintiff asserts that the Proposed Settlement “represents more than 100% of the risk-adjusted 13 settlement value of the claims” (Doc. 23 at 28), yet it is clear that this “risk-adjusted” value is not 14 an accurate assessment of Defendant’s exposure for Plaintiff’s claims. In the absence of an 15 accurate valuation of Plaintiff’s claims, the undersigned is unable to balance the Proposed 16 Settlement against the expected recovery of those claims and therefore cannot find that the 17 Proposed Settlement is reasonable or “within the range of possible approval.” Tableware, 484 F. 18 Supp. 2d at 1079. 19 2. Class Release 20 The terms of Class Release in the Proposed Settlement raises serious due process concerns 21 with respect to absent class members. It proposes a release by the Settlement Class of 22 claims for violation of the California Labor Code alleged in the operative Complaint and those arising from facts alleged in the operative Complaint, 23 including claims under Labor Code sections 201, 202, 203, 226, 226.7 or 2699 et 24 seq., claims under California Business & Professions Code Section 17200 et seq. based on the allegations and causes of action in the operative complaint, and the 25 applicable Industrial Welfare Commission Wage Orders based on the allegations and causes of action in the operative complaint, or any similar state or federal law, 26 statutory, constitutional, contractual or common law claims for wages, damages, unpaid costs or expenses, penalties, liquidated damages, interest, attorneys’ fees, 27 litigation costs, restitution, or equitable relief. 1 (Proposed Settlement § I.3, Doc. 23-1 at 33 (emphasis added).) It is not clear to what the term 2 “similar” applies. Limiting it to claims that are similar to “the applicable Industrial Welfare 3 Commission Wage Orders” does not appear to make sense, as the IWC Wage Orders do not create 4 and are not themselves causes of action. A more reasonable interpretation is that “similar” applies 5 to all of the foregoing sources of law, i.e., “claims for violation of the California Labor Code 6 alleged in the operative Complaint and those arising from facts alleged in the operative 7 Complaint, including claims under Labor Code sections 201, 202, 203, 226, 226.7 or 2699”; 8 “claims under California Business & Professions Code Section 17200 et seq. based on the 9 allegations and causes of action in the operative complaint”; and “the applicable Industrial 10 Welfare Commission Wage Orders based on the allegations and causes of action in the operative 11 complaint.” 12 The undersigned questions how an absent class member would know what claims fall within 13 the category of “similar” to the other sources of law enumerated in the Class Release. Without 14 knowing what claims are deemed “similar,” the class member has no way of knowing what claims 15 they are agreeing to release. Beyond the inclusion of the vague term “similar,” the Class Release 16 is overbroad: it releases claims under entire areas of law such as “state or federal law, statutory, 17 constitutional, contractual or common law” and types of relief that Plaintiff did not allege in his 18 First Amended Complaint and did not litigate in this action. (Proposed Settlement § I.3, Doc. 23- 19 1 at 33.) This does not comport with due process. See Phillips Petroleum Co. v. Shutts, 472 U.S. 20 797, 811–12 (1985) (holding that, to satisfy due process, notice “must be the best practicable, 21 ‘reasonably calculated, under all the circumstances, to apprise interested parties of the pendency 22 of the action and afford them an opportunity to present their objections’ “) (quoting Mullane v. 23 Cent. Hanover Bank & Tr. Co., 339 U.S. 306, 314 (1950)); Allen v. Bedolla, 787 F.3d 1218, 1223 24 (9th Cir. 2015) (noting the “unique due process concerns for absent class members” and 25 commenting that “the district court has a fiduciary duty to look after the interests of those absent 26 class members”) (quoting Hanlon, 150 F.3d at 1026); Bond v. Ferguson Enters., Inc., No. 1:09– 27 cv–01662 OWW MJS, 2011 WL 284962, at *7 (E.D. Cal. Jan. 25, 2011) (“This form of release 1 v. Hargraves, No. CV-04-0214-FVS, 2008 WL 11425713, at *2 (E.D. Wash. Sept. 25, 2008) 2 (“[W]here the terms of a settlement involve the release of claims, the settlement notice must 3 clearly identify the claims being released.”). 4 In virtually every settlement it will be in a defendant’s interest to frame the release of claims 5 as broadly as possible. While a plaintiff might not see a downside in waiving claims he had no 6 interest in litigating, this is the sort of behavior about which reviewing courts must be vigilant, 7 because it is suggestive of collusion. See, e.g., Belew v. Brink’s, Inc., 721 F. App’x 734, 735 (9th 8 Cir. 2018) (“One indication of collusion is an overbroad release of claims.”); Ambrosino v. Home 9 Depot U.S.A., Inc., Civil No. 11cv1319 L(MDD), 2014 WL 1671489, at *2 (S.D. Cal. Apr. 28, 10 2014) (“Courts have found that overly broad release provisions, which release a Defendant from 11 all claims to settle their wage claims, including claims that are unrelated to the claims asserted in 12 the complaint, are improper in FLSA and class action settlements.”) (collecting cases). Here, 13 individual Settlement Class members may have claims, wholly unrelated to those that are the 14 subject of this action, that they are unknowingly releasing as a result of the Proposed Settlement. 15 The overly broad release of claims that are unrelated, that have not been litigated, alleged, or 16 valued, and of which class members cannot know the full extent, is yet another deficiency that 17 prevents the undersigned from recommending approval of the Proposed Settlement. See Kempen 18 v. Matheson Tri-Gas, Inc., No. 15-cv-00660-HSG, 2016 WL 4073336, at *9 (N.D. Cal. Aug. 1, 19 2016) (“Courts in this district routinely reject proposed class action settlement agreements that 20 try to release all claims in a wage-and-hour case relating to compensation as overbroad and 21 improper.”); Boyd v. Avanquest N. Am. Inc., No. 12-cv-04391-WHO, 2015 WL 4396137, at *1 22 (N.D. Cal. July 17, 2015) (denying preliminary settlement approval because “there are ‘obvious 23 deficiencies’ in the proposed Settlement Agreement,” “namely, the overly broad release 24 provision”); Bond v. Ferguson Enters., Inc., No. 1:09-cv-01662 OWW MJS, 2011 WL 284962, 25 2011 WL 284962, at *7 (E.D. Cal. Jan. 25, 2011) (noting that the proposed release was overbroad 26 because it did “not appropriately track the extent and breadth of Plaintiffs’ allegations in this case 27 and releases unrelated claims of any kind or nature that class members may have against 1 *1 (N.D. Cal. July 30, 2014) (rejecting settlement approval because release of claims was “overly 2 broad”). 3 3. Opt-Out Procedure 4 Due process also requires that any class member bound by a class action settlement, at a 5 minimum, be afforded the opportunity “to remove himself from the class.” Ortiz v. Fibreboard 6 Corp., 527 U.S. 815, 848 (1999) (citation and internal quotation marks omitted). Here, the 7 Proposed Settlement is devoid of any provision that would exclude members from the Settlement 8 Class who do not receive the notice of this litigation. 9 Unless a class member elects to opt-out of the settlement, according to the Proposed 10 Settlement, they are subject to the above-described release. (Proposed Settlement §§ VI.2, VI.3, 11 X.1, Doc. 23-1 at 45–47, 52.) A class member cannot opt out of the litigation, however, unless 12 they submit a request to be excluded (see id. § VI.3, Doc. 23-1 at 46–47), and a class member 13 cannot request to be excluded unless they have notice of the litigation. Under the Proposed 14 Settlement, the settlement administrator would send a notice form to the last-known address of 15 each class member via first-class mail. (Id. § VI.2, Doc. 23-1 at 45–46.) In the event the any 16 notice mailed to a class member is returned as undeliverable, the administrator shall perform a 17 “skip trace search” and seek an “address correction” for such class member, at which time a 18 second notice will be mailed. (Id. § VI.3, Doc. 23-1 at 46.) The Proposed Settlement does not 19 address situations where no address correction is obtained as a result of the skip trace search, or 20 where the second class notice is returned as undeliverable. In those situations, due process would 21 require those class members be excluded from the Settlement Class. See, e.g., Sanchez, 2015 WL 22 4662636, at *12 . Because the Proposed Settlement does not exclude from it any class member 23 whose class notice is returned as undeliverable by the post office (either on the first or second 24 attempt), the undersigned cannot conclude that the Proposed Settlement affords minimum due 25 process to each of the putative class members. 26 4. Attorney’s Fees 27 Under the terms of the Proposed Settlement, Plaintiff’s counsel will make a separate 1 (Decl. of Craig J. Ackermann ¶ 51, Doc. 23-1 at 17.) It is unclear what is meant by “up to,” and 2 the undersigned assumes that Plaintiff will be requesting 33.3 percent. 3 When a negotiated class action settlement includes an award of attorney’s fees, the fee 4 award must be evaluated in the overall context of the settlement. Knisley v. Network Assocs., 312 5 F.3d 1123, 1126 (9th Cir. 2002). At the same time, the court “ha[s] an independent obligation to 6 ensure that the award, like the settlement itself, is reasonable, even if the parties have already 7 agreed to an amount.” Bluetooth, 654 F.3d at 941; see also Zucker v. Occidental Petroleum Corp., 8 192 F.3d 1323, 1328–29 (9th Cir. 1999). Where, as here, fees are to be paid from a common 9 fund, the relationship between the class members and class counsel “turns adversarial.” In re 10 Washington Pub. Power Supply Sys. Sec. Litig., 19 F.3d 1291, 1302 (9th Cir. 1994). As a result, 11 the district court must assume a fiduciary role for the class members in evaluating a request for 12 an award of attorney fees from the common fund. Id.; Rodriguez v. W. Publ’g Corp., 563 F.3d 13 948, 968 (9th Cir. 2009). 14 The Ninth Circuit has approved two methods for determining attorney’s fees in cases where 15 the attorney’s fee award is taken from the common fund set aside for the entire settlement: the 16 “percentage of the fund” method and the “lodestar” method. Vizcaino v. Microsoft Corp., 290 17 F.3d 1043, 1047 (9th Cir. 2002) (citation omitted). The district court retains discretion in common 18 fund cases to choose either method. Id.; Vu v. Fashion Inst. of Design & Merch., No. CV 14- 19 08822 SJO (EX), 2016 WL 6211308, at *5 (C.D. Cal. Mar. 22, 2016). Under either approach, 20 “[r]easonableness is the goal, and mechanical or formulaic application of either method, where it 21 yields an unreasonable result, can be an abuse of discretion.” Fischel v. Equitable Life Assurance 22 Soc’y of the U.S., 307 F.3d 997, 1007 (9th Cir. 2002). 23 Under the percentage of the fund method, the court may award class counsel a given 24 percentage of the common fund recovered for the class. Id. In the Ninth Circuit, a twenty-five 25 percent award is the “benchmark” amount of attorney’s fees, but courts may adjust this figure 26 upwards or downwards if the record shows “special circumstances justifying a departure.” Id. 27 (quoting Six (6) Mexican Workers v. Ariz. Citrus Growers, 904 F.2d 1301, 1311 (9th Cir. 1990)). 1 1047; In re Activision Sec. Litig., 723 F. Supp. 1373, 1377 (N.D. Cal. 1989) (“This court’s review 2 of recent reported cases discloses that nearly all common fund awards range around 30% even 3 after thorough application of either the lodestar or twelve-factor method.”). Nonetheless, an 4 explanation is necessary when the district court departs from the twenty-five percent benchmark. 5 Powers v. Eichen, 229 F.3d 1249, 1256–57 (9th Cir. 2000). 6 To assess whether the percentage requested is reasonable, courts may consider a number of 7 factors, including: 8 [T]he extent to which class counsel achieved exceptional results for the class, whether the case was risky for class counsel, whether counsel’s performance generated benefits beyond 9 the cash settlement fund, the market rate for the particular field of law (in some circumstances), the burdens class counsel experienced while litigating the case (e.g., cost, 10 duration, foregoing other work), and whether the case was handled on a contingency basis. 11 In re Online DVD-Rental Antitrust Litig., 779 F.3d 934, 954–55 (9th Cir. 2015) (internal 12 quotation marks omitted). The Ninth Circuit has permitted courts to award attorney’s fees using 13 this method “in lieu of the often more time-consuming task of calculating the lodestar.” 14 Bluetooth, 654 F.3d at 942. 15 Plaintiff brings various state law claims and, under California law, “[t]he primary method 16 for establishing the amount of reasonable attorney fees is the lodestar method.” In re Vitamin 17 Cases, 110 Cal. App. 4th 1041, 1053 (2003) (internal quotation marks and citations omitted). The 18 court determines the lodestar amount by multiplying a reasonable hourly rate by the number of 19 hours reasonably spent litigating the case. See Ferland v. Conrad Credit Corp., 244 F.3d 1145, 20 1149 (9th Cir. 2001). The product of this computation, the “lodestar” amount, yields a 21 presumptively reasonable fee. Gonzalez v. City of Maywood, 729 F.3d 1196, 1202 (9th Cir. 22 2013); Camacho v. Bridgeport Fin., Inc., 523 F.3d 973, 978 (9th Cir. 2008). The Ninth Circuit 23 has recommended that district courts apply one method but cross-check the appropriateness of 24 the amount by employing the other as well. See Bluetooth, 654 F.3d at 944 25 In the Ninth Circuit, courts typically calculate 25% of the common fund as the “benchmark” 26 for a reasonable fee award providing adequate explanation in the record for any special 27 circumstances that justify departure. Id. at 942; Staton, 327 F.3d at 952; Six (6) Mexican Workers, 1 904 F.2d at 1311. Here, Plaintiff’s fee amount is above this benchmark. Plaintiff’s motion does 2 not demonstrate justification to depart higher than 25 percent, particularly in light of the relatively 3 early stage of this action, where settlement was reached prior to class certification. It also does 4 not include evidence of the actual number of hours worked in this action for the undersigned to 5 calculate the lodestar amount to cross-check the appropriateness of a departure from the 6 benchmark of 25 percent. As for Plaintiff’s counsel’s 2018 billable rate of $717 per hour, see 7 Decl. of Craig J. Ackermann ¶ 53, the undersigned notes that it is not in accord with the market 8 rate in the Fresno Division of the Eastern District of California for similar services by lawyers of 9 reasonably comparable skill, experience and reputation. Blum v. Stenson, 465 U.S. 886, 895–96, 10 & n.11 (1984). See Silvester v. Harris, No. 1:11–CV–2137 AWI SAB, 2014 WL 7239371 at *4 11 (E.D. Cal. Dec. 2014) (concluding that “hourly rates generally accepted in the Fresno Division 12 for competent experienced attorneys [are] between $250 and $380, with the highest rates 13 generally reserved for those attorneys who are regarded as competent and reputable and who 14 possess in excess of 20 years of experience.”). 15 In light of the foregoing, the undersigned cannot recommend approval of the attorney’s fee 16 award based on the record before it. Should Plaintiff renew his motion for preliminary approval 17 and seek attorney’s fees in excess of 25 percent of the gross settlement, counsel shall explain the 18 “special circumstances justifying a departure” from the benchmark, see Bluetooth, 654 F.3d at 19 942, and include sufficient information to enable the Court to cross-check the requested amount 20 with the lodestar amount based upon counsels’ submission in order to determine whether the 21 award of an above-benchmark percentage in fees is reasonable. See Powers, 229 F.3d at 1256- 22 57 (noting that an explanation is necessary when the district court departs from the twenty-five 23 percent benchmark). 24 5. Incentive Award 25 Plaintiff also requests that the Court approve an incentive payment in an amount “up to” 26 $10,000 to be awarded to Roderick Murray as named plaintiff (the “Incentive Award”). 27 (Proposed Settlement § IV.2, Doc. 23-1 at 41.) Without clarification as to what is meant by “up 1 A district court may award incentive payments to named plaintiffs in class action cases. 2 Rodriguez, 563 F.3d at 958–59. The purpose of incentive awards is to “compensate class 3 representatives for work done on behalf of the class, to make up for financial or reputational risk 4 undertaking in bringing the action, and, sometimes, to recognize their willingness to act as a 5 private attorney general.” Id. To justify an incentive award, a class representative must present 6 “evidence demonstrating the quality of plaintiff’s representative service,” such as “substantial 7 efforts taken as class representative to justify the discrepancy between [his] award and those of 8 the unnamed plaintiffs.” Alberto v. GMRI, Inc., 252 F.R.D. 652, 669 (E.D. Cal. 2008). Such 9 incentive awards are particularly appropriate in wage-and-hour actions where a plaintiff 10 undertakes a significant reputational risk in bringing suit against her former employer. Rodriguez, 11 563 F.3d at 958–59. 12 The Ninth Circuit has emphasized, however, that “district courts must be vigilant in 13 scrutinizing all incentive awards.” Radcliffe v. Experian Info. Sols., Inc., 715 F.3d 1157, 1165 14 (9th Cir. 2013) (internal quotation marks and citation omitted). In keeping with that admonition, 15 district courts have declined to approve incentive awards that represent an unreasonably high 16 proportion of the overall settlement amount or are disproportionate relative to the recovery of 17 other class members. See Ontiveros v. Zamora, 303 F.R.D. 356, 365–66 (E.D. Cal. 2014) (finding 18 an incentive award of $20,000, comprising 1% of the common fund, to be excessive under the 19 circumstances, and reducing the award to $15,000, where class representative spent 271 hours on 20 the litigation and relinquished the opportunity to bring several of his own claims in order to act 21 as class representative); see also Ko v. Natura Pet Prods., Inc., No. C 09–2619 SBA, 2012 WL 22 3945541, at *15 (N.D. Cal. Sept. 10, 2012) (holding that an incentive award of $20,000, 23 comprising one percent of the approximately $2 million common fund was “excessive under the 24 circumstances” and reducing the award to $5,000); Wolph v. Acer Am. Corp., No. C 09–01314 25 JSW, 2013 WL 5718440, at *6 (N.D. Cal. Oct. 21, 2013) (reducing the incentive award to $2,000 26 where the class representatives did not demonstrate great risk to finances or reputation in bringing 27 the class action). In reducing the award, courts have noted that overcompensation of class 1 divergence between the interests of the named plaintiff and the absent class members, destroying 2 the adequacy of class representatives. See Staton, 327 F.3d at 977–78; see also Radcliffe, 715 3 F.3d at 1165. 4 Here, the Proposed Settlement provides for a maximum Incentive Award of $10,000. 5 Plaintiff represents that the award is intended to compensate him for his active participation in 6 the investigation of the issues in this case, in reviewing pleadings and responding to discovery, 7 and in the mediation leading to the Proposed Settlement. (Decl. of Roderick Murray ¶¶ 8, 12, 8 Doc. 23-3 at 3, 4.) Plaintiff also notes that the class representative undertook a significant 9 reputational risk by bringing suit against Defendant. (Id. at 4.) 10 The undersigned finds that the proposed $10,000 Incentive Award appears to be excessive 11 under the circumstances of the case. It is two times the amount that the Ninth Circuit has 12 considered reasonable. See Resnick v. Frank (In re Online DVD–Rental Antitrust Litig.), 779 13 F.3d 934, 947 (9th Cir.2015). It also constitutes 2.8 percent of the Gross Settlement and is more 14 than 40 times higher than the estimated $246.45 average payment for the other class members. 15 See Sandoval v. Tharaldson Emple. Mgmt., No. EDCV 08-482-VAP (OPx), 2010 WL 2486346, 16 at *9–10 (C.D. Cal. June 15, 2010) (collecting cases and concluding that plaintiff’s request for an 17 incentive award representing one percent of the settlement fund was excessive). See also 18 Sanchez, 2015 WL 4662636, at *20–21 (recommending $10,000 incentive award payment to 19 named plaintiff be reduced to $7,500), report and recommendation adopted, No. 1:14-CV-797- 20 AWI-MJS, 2015 WL 5138101 (E.D. Cal. Aug. 26, 2015). In addition, Plaintiff’s statement in his 21 declaration regarding the unspecified “other drivers” (see Section III.A.4, supra) suggests the 22 Incentive Award may not adequately reflect his participation in the lawsuit. 23 As with the attorney’s fees award, the undersigned cannot recommend approval of an 24 Incentive Award in the amount of $10,000 at this time. Should Plaintiff renew his request for an 25 incentive award that amounts to a similarly high proportion of the overall settlement amount or 26 is disproportionate relative to the recovery of other class members, he shall submit evidence that 27 the requested award is warranted here, including evidence of the specific amount of time Plaintiff 1 litigation, and the particular benefit that Plaintiff provided to counsel and the class as a whole 2 throughout the litigation. 3 6. Other Issues 4 a. Cy Pres Distribution 5 The Proposed Settlement provides that “[u]nclaimed Funds returned as undeliverable and 6 California Individual Settlement Payment checks remaining un-cashed for more than 180 days 7 after issuance will be disbursed subject to the provisions of California Code of Civil Procedure § 8 384(b)(3), with that portion of the unclaimed funds allocated under Section 384(b)(3)(C) 9 allocated to the Justice Gap Fund established by the California State Bar.” (Proposed Settlement 10 § VII.4, Doc. 23-1 at 50.) This cy pres provision conforms to an outdated version of Section 384, 11 which was amended effective June 27, 2018. In order for the Court to approve the Proposed 12 Settlement with a cy pres distribution provision, it must be amended to bring such provision in 13 compliance with the amended Section 384.7 14 b. Class Member Information Sheet 15 Page 1 of the “Class Member Information Sheet” (Doc. 23-1 at 72) indicates that the case 16 is pending in the “United States Superior Court, Eastern District of California.” This appears to 17 be a typographical error that needs to be corrected, should the parties wish to renew their request 18 for preliminary approval of a settlement. 19 IV. CONCLUSION AND RECOMMENDATION 20 The undersigned finds that Plaintiff has not demonstrated that conditional class certification 21 under Rule 23(a) and (b)(3) or preliminary approval of the Proposed Settlement is warranted. 22 While the undersigned is mindful of the strong judicial policy favoring settlements, see Class 23 Plaintiffs v. City of Seattle, 955 F.2d 1268, 1276 (9th Cir. 1992), this settlement cannot be 24 approved without additional information and significant amendment. It is therefore 25 7 As amended, Section 384 now states that it is “the policy of the State of California to ensure that the unpaid cash residue . . . in class action litigation are distributed . . . in a manner designed either to further the purposes of the 26 underlying class action ... or to promote justice for all Californians.” Cal. Code Civ. Proc. § 384(a). The revised section goes on to require a court to set a date when the parties are to report to the court the total amount paid to class 27 members. Id. § 384(b). After the report is received, the court is directed to amend the judgment to direct the defendant to pay the sum of the unpaid residue, plus interest, to nonprofit organizations or foundations to support projects that 1 RECOMMENDED that Plaintiff’s motion for preliminary approval of a class action settlement 2 (Doc. 23) be DENIED, without prejudice to Plaintiff renewing the motion to address the issues 3 and concerns identified herein. 4 These findings and recommendation are submitted to the district judge assigned to the case, 5 pursuant to the provisions of Title 28 U.S.C. § 636(b)(l)(B) and this Court’s Local Rule 304. 6 Within twenty-one (21) days of service of this recommendation, any party may file written 7 objections to these findings and recommendation with the Court and serve a copy on all parties. 8 Such a document should be captioned “Objections to Magistrate Judge’s Findings and 9 Recommendation.” The district judge will review the magistrate judge’s findings and 10 recommendation pursuant to 28 U.S.C. § 636(b)(1)(C). The parties are advised that failure to file 11 objections within the specified time may result in the waiver of rights on appeal. Wilkerson v. 12 Wheeler, 772 F.3d 834, 839 (9th Cir. 2014) (citing Baxter v. Sullivan, 923 F.2d 1391, 1394 (9th 13 Cir.1991)). 14 IT IS SO ORDERED. 15 Sheila K. Oberto Dated: November 15, 2019 /s/ . 16 UNITED STATES MAGISTRATE JUDGE 17 18 19 20 21 22 23 24 25 26 27