Guinn v. Sugar Transport of the Northwest, Inc.

Filing 107

ORDER signed by Senior Judge William B. Shubb on 7/13/2018 ORDERING that 98 Motion for Approval of Settlement and Request for Dismissal of this action as against settling defendants Bronco and Classic be, and the same hereby is, GRANTED. IT IS FURTHER ORDERED that plaintiff's request for a Determination of Good Faith Settlement pursuant to California Code of Civil Procedure § 877 be, and the same hereby is, DENIED. (Washington, S)

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UNITED STATES DISTRICT COURT

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EASTERN DISTRICT OF CALIFORNIA

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RYAN GUINN, an individual, on
behalf of himself, and on
behalf of all other persons
similarly situated,
Plaintiff,

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v.
SUGAR TRANSPORT OF THE
NORTHWEST, INC., a California
Corporation; BRONCO WINE
COMPANY, a California
Corporation; CLASSIC WINES, a
California Corporation,

NO. 2:16-cv-325 WBS EFB

MEMORANDUM AND ORDER RE: MOTION
FOR APPROVAL OF SETTLEMENT,
DETERMINATION OF GOOD FAITH
SETTLEMENT, AND REQUEST FOR
DISMISSAL

Defendants.

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Plaintiff Ryan Guinn brought this matter against

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defendants Sugar Transport of the Northwest (“Sugar Transport”),

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Bronco Wine Company (“Bronco”), and Classic Wines of California

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(“Classic”) for alleged violations of the Fair Labor Standards

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Act (“FLSA”), 29 U.S.C. § 216; the California Labor Code, Cal.

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Lab. Code §§ 201, 203, 204, and 512; and California’s Unfair

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Competition Law (“UCL”), Cal. Bus. & Prof. Code § 17200, et seq.
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Presently before the court is the Joint Motion for Approval of

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Settlement, Determination of Good Faith Settlement, and Request

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for Dismissal submitted together by plaintiff, Bronco, and

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Classic (collectively “the settling parties”).

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I.

(Docket No. 98.)

Factual and Procedural Background

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Plaintiff initiated this action against Sugar Transport

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on October 23, 2015.

(Docket No. 1.)

On January 24, 2017,

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plaintiff amended his complaint, adding Bronco and Classic as

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defendants.

(First Amended Compl. (“FAC”) (Docket No. 51).)

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Plaintiff contends that, as an alleged joint employer, Bronco and

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Classic owe him unpaid wages, premium pay, penalties, attorneys’

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fees, interest, and other damages for various alleged violations

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of FLSA and California Labor Code arising from his alleged

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employment.

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answered the Amended Complaint, generally denying the allegations

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and asserting a number of affirmative defenses.

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No. 62).)

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(Id.)

On February 27, 2017, defendants timely

(Answer (Docket

On December 20, 2017, the court issued an Order denying

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plaintiff’s Motion for Proceeding as a Collective Action under

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the FLSA and for Class Certification.

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Subsequently, seventeen of the former putative class members

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filed four separate lawsuits in state court, which are currently

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pending.

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¶ 3.)

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(Docket No. 82.)

(Decl. of Cassandra M. Ferranninni (“Ferrannini Decl.”)

Disputes remain between plaintiff and the settling

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defendants as to whether defendants can be considered plaintiff’s

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employer under a joint employer theory, whether plaintiff was

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entitled to overtime compensation, and whether plaintiff was
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provided requisite meal and rest breaks under California law.

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The parties entered negotiations and on May 2, 2018, they reached

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an agreed-upon settlement of any and all disputes between them.

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(Decl. of Brandy Barnes (“Barnes Decl.”) (Docket No. 99) at ¶

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14.)

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2018.

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The parties executed the Settlement on or around May 23,
(Id. ¶ 17.)
On June 7, 2018, the settling parties submitted a Joint

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Motion for Approval of Settlement, in which they seek (1) the

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court’s approval of their settlement under FLSA, (2) a

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determination that the Settlement was made in good faith pursuant

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to California Code of Civil Procedure sections 877 and 877.6,

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thereby barring claims for contribution and indemnity, and (3)

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dismissal of Classic and Bronco from this action, with prejudice.

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(Docket No. 98.)

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submitted an Opposition to this Joint Motion.

On June 25, 2018, defendant Sugar Transport
(Docket No. 102.)

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The parties are scheduled to mediate the pending state

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court cases, as well as the remainder of this case, on August 9,

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2018.

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II.

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(Ferranninni Decl. ¶ 8.)
Approval of Settlement
“Although the Ninth Circuit has not established a

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standard for district courts to follow when evaluating an FLSA

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settlement, California district courts frequently apply the

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standard established by the Eleventh Circuit in Lynn’s Food

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Stores, Inc. v. U.S. By and Through U.S. Dep’t of Labor, 679 F.2d

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1350, 1352 (11th Cir. 1982).”

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Corp., No. 14-cv-2778 CAB WVG, 2017 WL 697895, at *6 (S.D. Cal.

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Feb. 22, 2017).

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and release his claims against his employer or putative employer

Thompson v. Costco Wholesale

Pursuant to that standard, plaintiff may settle

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if the parties obtain court approval of the proposed settlement

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and if the settlement constitutes “a fair and reasonable

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resolution of a bona fide dispute over FLSA provisions.”

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U.S.C. § 216(b); Lynn’s Food Stores, 679 F.2d at 1355.

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Court approval is necessary to ensure an employee does

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not waive statutory rights as a result of an employer’s

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overreaching in a non-adversarial context.

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Inc., 679 F.2d at 1354.

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an adversarial context, as it was here, it is “more likely to

Lynn Food Stores,

However, when a settlement is reached in

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reflect a reasonable compromise of disputed issues” and may be

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approved by the court to promise the policy of encouraging

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settlement of litigation.

(Id. at 1353.)

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A.

Bona Fide Dispute

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“A bona fide dispute exists when there are legitimate

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questions about the existence and extent of Defendant’s FLSA

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liability.”

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2018 WL 1919823, at *2 (E.D. Cal. Apr. 24, 2018).

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the parties have been able to reach a settlement, significant

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disagreement remains, and there was no admission of liability on

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the part of any party.

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contends that settling defendants qualify as plaintiff’s employer

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under a theory of “joint employment,” defendants deny having an

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employment relationship with plaintiff.

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Further, with respect to FLSA potential liability, plaintiff

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argues that he was entitled to overtime compensation, while

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settling defendants contend that plaintiff was exempt from

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overtime.

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are a number of substantial disputes between settling parties

Seguin v. County of Tulare, No. 16-cv-1262 DAD SAB,

(Barnes Decl. ¶ 16.)

Here, although

While plaintiff

(Barnes Decl. ¶¶ 7-8.)

Based on these facts, the court concludes that there

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related to the facts of the case and the application of law to

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those facts.

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resolution of multiple bona fide disputes.

Accordingly, this Settlement represents the

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B.

Fair and Reasonable

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In order for the court to grant approval of the

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Settlement, it must also determine both that the process was fair

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and that the ultimate agreed upon settlement amount is fair and

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reasonable.

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amounting to only a fraction of the potential recovery will not

“It is well-settled law that a cash settlement

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per se render the settlement inadequate or unfair.”

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Justice v. Civil Service Commission, 688 F.2d 615, 628 (9th Cir.

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1982).

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the amount of the [settlement] will be less than what some

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[plaintiffs] feel they deserve but, conversely, more than the

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defendants feel those individuals are entitled to.”

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Further, “it is quite proper for a settling defendant to pay less

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than his proportionate share of the anticipated damages.

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required is simply that the settlement not be grossly

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disproportionate to the settlor’s fair share.”

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38 Cal. 3d 488 at 499.

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Officers for

Indeed, it is generally understood that, “[u]ltimately

Id.

What is

Tech-Bilt, Inc.,

The Settlement in this action was the product of arms-

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length negotiations between the parties and their counsel.

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(Barnes Decl. ¶¶ 14-16.)

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negotiations and understood that they were reaching a compromise

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of their dispute.

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reflects a compromise--the amount is less than plaintiff would

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have received if he had prevailed on all of his claims against

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defendants but more than defendants would have paid if they had

All parties were represented in those

(Barnes Decl. ¶¶ 14-16.)

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The Settlement

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prevailed at trial.

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the contested claims and defenses.
III.

The settling parties also seek a determination by this
court that the Settlement was reached in good faith, thereby
barring all pending and future claims against Bronco and Classic
for indemnity, contribution, declaratory relief and/or any other
claims under principles of comparative fault and/or negligence.
Sugar Transport opposes any such determination and argues that
the settling parties’ request must be denied.
A.

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(Barnes Decl. ¶ 15.)

Determination of Good Faith

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Thus, the court

concludes that the Settlement reached is reasonable in light of

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(Barnes Decl. ¶ 18.)

Court Authority

Federal courts have the authority to review and approve
settlements of federal and state-law claims and to enter
appropriate orders.

See Federal Sav. And Loan Ins. Corp. v.

Butler, 904 F.2d 505, 511 (9th Cir. 1990).

Federal courts

exercising supplemental jurisdiction over state-law claims, as is
the case here, ordinarily must apply the substantive law of the
state in which they are located.
U.S. 79, 85-89 (1994).

O’Melveny & Myers v. FDIC, 512

“[T]he case law is clear that state

settlement provisions amount to substantive, rather than purely
procedural, law.”

Slaven v. BP America, Inc., 958 F. Supp. 1472,

1478 (C.D. Cal. 1997).

Under California law, the “good faith” of

a settlement is evaluated under California Code of Civil
Procedure § 877.

Butler, 904 F.2d at 511.1

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Most relevant to this case is section 877.6(c), which
states that a determination of good faith settlement by the court
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Sugar Transport argues that the settling parties

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attempt to erroneously apply California Code of Civil Procedure §

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877 to the federal cause of action at issue in this case.

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federal courts have certainly applied § 877 to state law causes

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of action asserted in federal court, they have not applied this

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section to federal causes of action, and the court will not do so

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here.

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Cal. 1988)(holding sections 877 and 877.6 did not apply to action

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based on federal maritime law).

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While

See Daughtry v. Diamond M Co., 693 F. Supp. 856, 861 (C.D.

In support of applying § 877, the settling parties

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point to an unpublished Northern District of California case in

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which the court applied California Code of Civil Procedure §

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877.6 to the settlement at issue, despite the presence of federal

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claims.

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04358-JST, 2015 WL 1885634, at *4 (N.D. Cal. Apr. 24, 2015).

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However, the court did so only after determining that the state

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law claims predominate.

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explained “that where federal maritime causes of action remain

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against the non-settling defendants, the court cannot condone the

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application or approval of the California state settlement law

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even as to the state law causes of action.”

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1484.

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thus the Schaeffer decision is not applicable.

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Schaeffer v. Gregory Vill. Partners, L.P., No. 13-cv-

Conversely, in Slaven, the court

958 F. Supp. at

In this case, the state law claims do not predominate, and

The settling parties next argue that, whether or not

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state or federal law claims predominate in this case, federal law

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provides the same protections as California Code of Civil

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bars further contribution and indemnity claims by the nonsettling defendant.
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Procedure § 877, and thus the court can apply the same rationale

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and bar all future indemnity claims.

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law that allows partial settlements to bar claims for

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contribution and indemnity appears only to have been applied in

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federal securities cases.

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1324, 1338 (E.D. Cal. 1987)(holding that settlement with one set

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of defendants in multiple defendant federal securities law action

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operates to bar nonsettling defendants’ implied rights of

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contribution where settlement was fundamentally fair and

However, the federal common

See Nelson v. Bennett, 662 F. Supp.

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equitable).

In such cases, the courts have explained that

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“partial settlements and bar orders affect substantive rights

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that are the province of federal courts in securities actions”

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and “thus, a uniform federal settlement bar rule, rather than the

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California settlement bar statute, will govern these federal

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securities claims.”

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differentiated securities cases by explaining that Congress

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statutorily created a right to contribution for securities law,

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but “has not yet created laws governing the right it created,

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[and thus] the federal courts are free to fashion a common law.”

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Franklin v. Kaypro Corp., 884 F.2d 1222, fn. 10 (9th Cir.

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1989)(citing Texas Indus. Inc. v. Radcliff Materials, Inc., 451

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U.S. 630 (1981)).

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which a federal court has applied this federal common law outside

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of the securities law context.

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FLSA cases, Congress has already created a law regarding

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settlement procedures, and thus there is no need to resort to

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federal common law.

Id.

Importantly, the courts have

However, this court is unaware of any case in

Furthermore, in the context of

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Accordingly, given the presence of the FLSA claim and

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the fact that state law causes of action do not predominate in

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this case, there is no legal authority to support an application

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of California Code of Civil Procedure § 877.

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will not make a good faith determination regarding any part of

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this settlement.

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V.

Dismissal of Bronco and Classic

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Thus, the court

Sugar Transport did not provide any opposition to the
joint Request for Dismissal with prejudice of settling defendants

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Bronco and Classic.

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opposing the Determination of Good Faith.

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grant the settling parties’ Request for Dismissal.

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Instead, Sugar Transport solely focused on
Thus, the court will

IT IS THEREFORE ORDERED that plaintiff’s Motion for

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Approval of Settlement and Request for Dismissal of this action

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as against settling defendants Bronco and Classic be, and the

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same hereby is, GRANTED.

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IT IS FURTHER ORDERED that plaintiff’s request for a

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Determination of Good Faith Settlement pursuant to California

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Code of Civil Procedure § 877 be, and the same hereby is, DENIED.

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Dated:

July 13, 2018

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