Smothers et al v. NorthStar Alarm Services, LLC

Filing 55

ORDER signed by District Judge Kimberly J. Mueller on 1/22/2019 ORDERING 28 Motion to Amend the Complaint and 33 Motion to Certify Class MOOT; GRANTING in PART and DENYING in PART 39 Motion for preliminary approval; GRANTS plaintiffs' motions for preliminary certification of the Rule 23 Class, to appoint class counsel, and for preliminary certification of the FLSA Group but DENIES plaintiffs' motion for preliminary approval of the settlement. (Washington, S)

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UNITED STATES DISTRICT COURT

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FOR THE EASTERN DISTRICT OF CALIFORNIA

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JULIAN SMOTHERS; ASA DHADDA,

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Plaintiffs,

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No. 2:17-cv-00548-KJM-KJN

v.

ORDER

NORTHSTAR ALARM SERVICES, LLC,

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Defendants

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Plaintiffs move for leave to file a second amended complaint, preliminary approval

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of a class action settlement, preliminary certification of proposed classes under Federal Rule of

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Civil Procedure 23 and conditional certification of the proposed class under the Fair Labor

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Standards Act. The motions are unopposed. As explained below, the court GRANTS in part and

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DENIES in part plaintiffs’ motions.

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I.

BACKGROUND
A.

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Factual and Procedural Background
Plaintiffs Julian Smothers and Asa Dhadda allege defendant NorthStar Alarm

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Services, LLC (“NorthStar”) violated California and federal law by not properly compensating

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plaintiffs or providing them with mandatory wages, meal periods, rest periods, reimbursements and

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accurate wage statements. See Second Am. Compl. (“SAC”), ECF No. 45.1

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The named plaintiffs are former NorthStar employees. Id. ¶¶ 1, 2, 32.2 NorthStar

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specializes in home security and automation, selling, installing and servicing alarm systems

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throughout the United States. Motion for Preliminary Approval (“Mot.”), ECF No. 39 at 11;3 SAC

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¶ 31. To establish operations in a city, NorthStar typically establishes a base of operations in a

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central apartment complex for its team of Alarm Installation Technicians. Mot. at 11; SAC ¶ 31.

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A team generally includes one Lead Alarm Installation Technician and several non-lead Alarm

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Installation Technicians. Mot. at 11; SAC ¶ 31. Lead Alarm Installation Technicians have

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oversight and inventory control duties but otherwise perform the same role as non-lead Alarm

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Installation Technicians. Mot. at 11; SAC ¶ 31. All technicians typically report for a morning

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meeting to review training before traveling into the field to complete alarm installation assignments.

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Mot. at 11; SAC ¶ 19. After completing assignments, technicians report to the central base of

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operations to turn in paperwork and account for inventory. Mot. at 11; SAC ¶ 21. NorthStar

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compensates technicians in part through “a piece rate based on alarm installations.” Mot. at 12;

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SAC ¶ 21. Plaintiffs contend this compensation scheme deprives technicians of “a separate . . .

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hourly compensation for time spent in ‘non-productive’ tasks . . . . such as attending morning

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meetings, traveling out into the field, waiting in the field between installation jobs, correcting

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installations, or turning in forms and accounting for inventory at the end of the day.” Mot. at 12;

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SAC ¶¶ 21.

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Plaintiffs initially filed a proposed second amended complaint that contained several errors and
inconsistences, many of which the court identified at hearing. See ECF No. 39, Ex. 1. At the
court’s prompting, and after meeting and conferring with defendants, plaintiffs submitted the
current proposed second amended complaint, which the court accepts and cites throughout this
order.

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The second amended complaint refers to Dhadda as both “a current” NorthStar employee, ¶ 32,
and “a former” NorthStar employee, ¶ 2. Dhadda confirmed in a recently filed declaration that he
is no longer a NorthStar employee. ECF No. 54-2 ¶ 7.
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The court cites specific paragraph numbers as those numbers are provided in declarations and
the settlement agreement, but cites ECF page numbers in referring to the briefs.
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Plaintiffs filed this putative wage and hour class action complaint in state court

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alleging NorthStar violated various provisions of the California Labor Code and the federal Fair

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Labor Standards Act (“FLSA”). Compl., ECF No. 1, Ex. A. NorthStar removed the action to this

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court, ECF No. 1, and, following discovery, plaintiffs moved to amend their complaint, ECF No.

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28, and then moved for preliminary certification of their FLSA collective action, ECF No. 33.

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Before the court decided plaintiffs’ motion to amend, which was fully briefed and taken under

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submission, see ECF Nos. 28-29, 31-32, and before the motion for conditional certification was

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fully briefed, see ECF No. 33, the parties reached a settlement agreement, see ECF No. 35

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(Settlement Notice); see also Joint Stipulation of Class Action Settlement and Release

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(“Settlement), Jared Hague Decl., ECF No. 39-2, Ex. 1 at 11-74. Upon the parties’ request, the

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court continued the pending FLSA certification motion in anticipation of the instant motion. See

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ECF No. 36 (Second Am. to Scheduling Order). At hearing, with S. Brett Sutton and Jared Hague

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appearing for the plaintiffs and Andrew Collins appearing for the defendant, both parties agreed

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the instant motion moots plaintiffs’ motion to amend and motion for conditional certification. See

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Transcript (“Tr.”), ECF No. 47 at 2:21-3:7.

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B.

Settlement Agreement

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The parties reached a settlement agreement following mediation with a former judge

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and experienced wage and hour class action mediator. Mot. at 28; Jared Hague Decl. ¶ 18.4 Critical

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components of the proposed settlement are addressed below.

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1.

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Given significant differences between Rule 23 class actions and FLSA collective

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actions, the parties’ settlement agreement proposes two settlement classes with separate settlement

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funds, though both classes span the same February 3, 2013 through December 31, 2017 class

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period. See Settlement §§ I.4 & I.9; Fed. R. Civ. P. 23(a)-(b), (e); 29 U.S.C. § 216(b).

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Proposed Classes

The court has conducted an in camera review of the parties’ confidential mediation briefs and
the mediator’s global settlement proposal.
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The parties propose the following class definitions:

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California Class: All current and former non-exempt Alarm
Installation Technicians and Lead Alarm Installation Technicians
who performed compensable work for Defendant in the State of
California at any time from February 3, 2013 through December 31,
2017, as defined herein.

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Settlement § I.4.a.

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FLSA Group: All current and former non-exempt Alarm Installation
Technicians and Lead Alarm Installation Technicians who
performed compensable work for Defendant in the United States at
any time from February 3, 2014 through December 31 [sic] 2017, as
defined herein, and who affirmatively opt in to the Settlement by
cashing, depositing, or otherwise negotiating a Settlement Payment
Check.

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Id. § I.4.b. NorthStar has identified all putative class members through its records, Mot. at 13, and

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confirms there are 94 individuals in the California Class and 285 individuals in the FLSA Group,

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Settlement § I.4.a.-b.

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Proposed Gross Settlement Amount5

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2.

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Under the Agreement, NorthStar will make a $1.8 million gross settlement payment

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to the settlement administrator. Settlement §§ I.21 (“Gross Settlement Amount”), V.2 (“Payment

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by Defendant”). The parties propose the following allocation of the gross settlement amount:

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(1) Up to $600,000, one-third of the gross settlement, for class
counsel as attorneys’ fees, and up to $20,000 for costs and expenses.
Id. § IV.7. Any difference in the amount actually awarded will revert
to the net settlement fund for distribution to class members. Id.

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(2) Up to $10,000 in enhancement payments for each named
plaintiff. Id. § IV.2. Any difference in the amount actually awarded
will revert to the net settlement fund for distribution to class
members. Id.

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(3) An anticipated $40,000 in administrative expenses paid to the
claims administrators. Additional expenses will be deducted from
the gross settlement amount, with the net settlement and class

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The Settlement erroneously states that Class funds will be paid directly from the Gross
Settlement Amount. Compare Settlement § I.21 (allocating 100% of gross settlement amount to
California Class and FLSA Group), with Settlement § I.25 (allocating 100% of net settlement
amount, after costs, fees and awards are deducted from the gross settlement amount, to the
classes). At hearing counsel confirmed the Settlement language defining the gross settlement
amount is erroneous and the class funds will be distributed from the net, not gross, settlement as
provided in § I.25.
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members’ awards recalculated accordingly, upon approval from the
court. Id. § VI.1. If expenses are less than $40,000, the excess will
be added to the net settlement amount prior to distribution to class
members. Id.

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(5) A $50,000 California Private Attorneys General Act of 2004
(“PAGA”) penalty, 75 percent ($37,500) of which will be paid to the
California Labor and Workforce Development Agency and 25
percent ($12,500) of which will be paid to the class. Id. § VII.1.e.

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(6) Any applicable tax withholding required. Id. §§ IV.5; VII.1.d.

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3.

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Accounting for all proposed distributions described above, plaintiffs estimate a

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$1,082,500 net settlement available for distribution to class members. See Mot. at 13; see also

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Proposed Net Settlement Amount

Settlement § I.25. The parties propose allocation of the net settlement amount as follows:
a.

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California Class Settlement Amounts

The California Class will receive an allocation of 44 4/9 percent ($481,111) of the

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net settlement amount. Settlement § I.25. This amount will be divided by 1,275, the total number

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of California Class Members’ workweeks, resulting in a “pay period rate.” Settlement

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§ VII.2.a. Each California Class member who does not opt-out of the settlement will receive a

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settlement amount equal to the number of his or her individual weeks worked between February 3,

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2013 and December 31, 2017, multiplied by the pay period rate. Id.
If more than 30 percent of California Class members opt-out, however, the parties

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agree the portion of the net settlement amount allocated to the California Class that would have

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been paid to the excluded individuals be returned to NorthStar. Id. § VI.4. Should fewer than 30

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percent of the California Class opt out of the settlement, the net settlement amount will not be

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reduced. Id.
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FLSA Group Settlement Amounts

The FLSA Group will receive an allocation of 55 5/9 percent ($601,389) of the net

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settlement amount. Id. § I.25. The FLSA Group’s share of the net settlement amount will be

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divided by 5,769, the FLSA Group members’ total number of workweeks, resulting in a pay

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period rate. Id. § VII.2.b. Each FLSA Group member will receive a settlement amount equal to

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the number of his or her individual weeks worked between February 3, 2014 and December 31,

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2017, multiplied by the pay period rate. Id.

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Should a member of the FLSA Group decline to opt-in to the settlement, the

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administrator will return the member’s settlement funds to NorthStar. Settlement § VII.6. But

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NorthStar guarantees payment of at least 50 percent of the FLSA Group allocation to FLSA

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Group members and, if necessary to meet that 50 percent commitment, a cy pres recipient. §

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VI.5. The parties propose the Justice Gap Fund of the State Bar of California as a cy pres

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recipient. Id.

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Non-Monetary Settlement

The settlement also includes non-monetary terms, including NorthStar’s agreement

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to make changes to its compensation practices. Settlement § IV.4. These changes include

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requiring NorthStar to record the daily hours worked by class members to ensure correct wage

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payments; paying Alarm and Lead Alarm Installation Technicians at least California minimum

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wage and overtime wages for all hours worked; posting and distributing meal and rest period

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bulletins; modifying on-call policies applicable to California Alarm and Lead Alarm Installation

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Technicians so those employees are not required to monitor their phones during off-duty hours or

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during meal and rest periods; and Reimbursing California Alarm and Lead Alarm Installation

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Technicians for reasonable business expenses, including reimbursement for required tools and for

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work-related travel conducted in personal vehicles at the IRS mileage rate. Id. § III.4.a–e.

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On March 19, 2018, as required under the parties’ settlement terms, NorthStar

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filed a declaration confirming it has taken all non-monetary action required under the Settlement.

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ECF No. 41.

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II.

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PRELIMINARY CLASS CERTIFICATION
A.

California Class

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Plaintiffs seek preliminary certification of the proposed California Class for

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settlement purposes and preliminary settlement approval under Rule 23. Mot. at 20-29. Rule 23

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permits class action settlements “only with the court’s approval” following “a hearing and on a

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finding” that the agreement is “fair, reasonable, and adequate.” Fed. R. Civ. P 23(e). Proposed
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class action settlements are reviewed in two stages, requiring two hearings. First, the court conducts

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a preliminary fairness analysis and, if necessary, a preliminary class certification analysis. Ann.

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Manual for Complex Litigation, Fourth, (May 2018 Update) (“MCL”), § 21.632; see In re

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Bluetooth Headset Prods. Liab. Litig., 654 F.3d 935, 946 (9th Cir. 2011). Second, after all absent

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class members are notified of the certification and proposed settlement, the court holds a final

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fairness hearing where it revisits class certification and determines whether to approve the

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settlement. MCL §§ 21.632-21.635 (4th ed.); Narouz v. Charter Commc’ns, LLC, 591 F.3d 1261,

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1267 (9th Cir. 2010).

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Preliminary certification in the settlement context is appropriate only if Rule 23’s

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certification requirements are satisfied. See Amchem Products, Inc. v. Windsor, 521 U.S. 591, 620

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(1997) (court owes “undiluted, even heightened, attention” to class certification requirements in

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settlement context); Fed. R. Civ. P. 23(c)(1) advisory committee’s note to 2003 amendment (“A

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court that is not satisfied that the requirements of Rule 23 have been met should refuse certification

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until they have been met.”). The court reviews each Rule 23 requirement below.

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1.

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The class must be “so numerous that joinder of all members is impracticable.” Fed.

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R. Civ. P. 23(a)(1). Joinder need not be impossible; rather, “the court must find that the difficulty

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or inconvenience of joining all members of the class makes class litigation desirable.” In re Itel

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Sec. Litig., 89 F.R.D. 104, 112 (N.D. Cal. 1981); accord Baghdasarian v. Amazon.com, Inc., 258

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F.R.D. 383, 388 (C.D. Cal. 2009) (defining “impracticability” as when joinder of all class members

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is “difficult or inconvenient”) (citations omitted). “While there is no fixed number that satisfies

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the numerosity requirement, as a general matter, a class greater than forty often satisfies the

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requirement, while one less than twenty-one does not.” Johnson v. Serenity Transportation, Inc.,

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No. 15-CV-02004-JSC, 2018 WL 3646540, at *6 (N.D. Cal. Aug. 1, 2018) (quoting Ries v. Ariz.

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Beverages USA LLC, 287 F.R.D. 523, 526 (N.D. Cal. 2012)).

Rule 23(a)(1) – Numerosity

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Here, the California Class consists of 94 technicians, and plaintiffs reasonably

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contend it would be impracticable to bring 94 individual suits. Mot. at 20. The numerosity

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requirement is satisfied.
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2.

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To satisfy the commonality requirement, there must be “questions of law or fact

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common to the class.” Fed. R. Civ. P. 23(a)(2). The “claims must depend upon a common

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contention . . . . of such a nature that it is capable of classwide resolution—which means that

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determination of its truth or falsity will resolve an issue that is central to the validity of each one of

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the claims in one stroke.” Wal-Mart Stores, Inc. v. Dukes, 564 U.S. 338, 350 (2011). The court

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considers “the capacity of [the] classwide proceeding to generate common answers” and takes note

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of “[d]issimilarities within the proposed class [] [that] have the potential to impede the generation

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of common answers.” See Millan v. Cascade Water Servs., Inc.,310 F.R.D. 593, 604 (E.D. Cal.

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Rule 23(a)(2) – Commonality

2015) (quoting Dukes, 564 U.S. at 350).

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“Commonality is generally satisfied where . . . ‘the lawsuit challenges a system-

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wide practice or policy that affects all of the putative class members.’” Franco v. Ruiz Food Prods.,

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Inc., No. CV 10-02354 SKO, 2012 WL 5941801, at *5 (E.D. Cal. Nov. 27, 2012) (quoting

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Armstrong v. Davis, 275 F.3d 849, 868 (9th Cir. 2001), abrogated on other grounds by Johnson v.

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California, 543 U.S. 499, 504–05 (2005))

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In their motion for preliminary certification, plaintiffs barely even attempt to

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establish that the commonality requirement is satisfied here. See Mot. at 20 (arguing, in light of

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the parties’ settlement, the California Class members’ “employment with Defendants [sic] as an

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Alarm Installation Technician during the Class Period” satisfies the commonality requirement).

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Plaintiffs’ revised second amended complaint provides better support and, given the nature of the

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class claims and definition of the class, the court finds the commonality requirement is satisfied at

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this preliminary stage. See SAC ¶ 26 (identifying 15 common questions of law and fact).

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Specifically, the common questions of law and fact raised in plaintiffs’ proposed second amended

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complaint will generate class-wide answers to the following central issues in this matter: whether

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NorthStar’s piece-rate payment policy violates California’s minimum wage laws by denying class

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members minimum wage for travel time between employment locations, waiting time, on-call time

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and time spent in meetings and repairing defective alarm systems; whether the piece-rate policy

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violates California law entitling class members to overtime and double time wages; whether
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NorthStar’s written meal period policy did not accurately describe class members’ entitlement to a

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first and second, duty-free meal break, and whether requirement that class members monitor their

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phones at all times denied class members meal breaks; whether NorthStar’s absence of a rest period

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policy and requirement that class members monitor their phones at all times deprived class

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members of ten-minute, duty-free rest periods; whether NorthStar provided plaintiffs with accurate

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pay records; and whether NorthStar’s requirement that class members have certain mandatory

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equipment, without reimbursing class members for that equipment, violated California law. Id.

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¶¶ 21-26(a)–(o). Each of these questions implicates NorthStar’s uniform compensation system and

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policies to which all class members were subject, and presents common questions “central to the

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validity of each one of the claims” and “capable of class-wide resolution.” See Dukes, 654 U.S.

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350. At this juncture, plaintiffs have satisfied the commonality requirement.

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3.

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The typicality requirement is satisfied if “the claims or defenses of the representative

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parties are typical of the claims or defenses of the class.” Fed. R. Civ. P. 23(a)(3). “Measures of

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typicality include ‘whether other members have the same or similar injury, whether the action is

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based on conduct which is not unique to the named plaintiffs, and whether other class members

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have been injured by the same course of conduct.’” Torres v. Mercer Canyons Inc., 835 F.3d 1125,

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1141 (9th Cir. 2016) (quoting Hanon v. Dataproducts Corp., 976 F.2d 497, 508 (9th Cir. 1992)).

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Under this “permissive” requirement, “representative claims are ‘typical’ if they are reasonably

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coextensive with those of absent class members; they need not be substantially identical.” Parsons

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v. Ryan, 754 F.3d 657, 685 (9th Cir. 2014) (quoting Hanlon v. Chrysler Corp., 150 F.3d 1011, 1020

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(9th Cir. 1998)).

Rule 23(a)(3) – Typicality

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Here, plaintiffs allege they, along with all class members, were “uniformly subject

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to the same” NorthStar policies for compensation, received the same itemized wage statements,

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“generally followed a similar daily routine during the summer season,” and were “subject to the

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same [NorthStar] written policies and procedures.” SAC ¶ 27. Plaintiffs thus allege their “claims

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are typical of the class claims.” Id. As discussed above, plaintiffs have identified NorthStar policies

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that presumably deprived technicians across the California Class of required compensation and rest
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and meal breaks. For present purposes, there is no indication the named plaintiffs’ claims differ

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substantively from those of the class and it appears NorthStar’s policies likely resulted in similar

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injuries across the class. Accordingly, at this juncture, the typicality requirement is satisfied.

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4.

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The adequacy requirement is satisfied only if the representative plaintiffs “will fairly

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and adequately protect the interests of the class.” Fed. R. Civ. P. 23(a)(4). Courts must consider

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whether “(1) [] the named plaintiffs and their counsel have any conflicts of interest with other class

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members and (2) [] the named plaintiff and their counsel [will] prosecute the action vigorously on

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behalf of the class[.]” Hanlon, 150 F.3d at 1020. “Serious conflicts of interest can impair adequate

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representation by the named plaintiffs, yet leave absent class members bound to the final judgment,

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thereby violating due process.” In re Volkswagen ‘Clean Diesel’ Mktg., Sales Practices, & Prod.

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Liab. Litig., 895 F.3d 597, 607 (9th Cir. 2018).

Rule 23(a)(4) – Adequacy

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While both named plaintiffs seek a relatively high incentive award, which the court

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addresses below, the record before the court does not suggest the named plaintiffs have conflicts of

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interest with the putative class members. Further, plaintiffs have participated in the litigation

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process, see Hague Decl. ¶ 17, and their claims and interests appear to be “aligned with [those] of

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the class,” Collins v. Cargill Meat Sols. Corp., 274 F.R.D. 294, 301 (E.D. Cal. 2011). With respect

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to the second factor, plaintiffs’ counsel have described their significant collective experience in

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class-action cases and, specifically, in class-action cases involving employment related matters.

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See S. Brett Sutton Decl. ¶¶ 5-13; Jared Hague Decl. ¶¶ 11-13. Plaintiffs’ counsel also describe the

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effort expended on this action thus far, which includes extensive discovery, investigation into the

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strengths and weaknesses of the class claims and participation in private mediation with a highly

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experienced mediator. See Jared Hague Decl. ¶ 14. At this juncture, the court finds the class

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representatives and counsel are adequate.

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5.

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Plaintiffs contend the California Class should be certified under Rule 23(b)(3),

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under which the court must find: “the questions of law or fact common to class members

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predominate over any questions affecting only individual members, and that a class action is

Rule 23(b)(3) – Predominance & Superiority

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superior to other available methods for fairly and efficiently adjudicating the controversy.” Fed.

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R. Civ. P. 23(b)(3); see Mot. at 22-23. In conducting the predominance and superiority inquiries,

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courts may consider Rule 23(b)(3)’s “non-exclusive factors”:

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(A) the class members’ interests in individually controlling the
prosecution or defense of separate actions;

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(B) the extent and nature of any litigation concerning the controversy
already begun by or against class members;

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(C) the desirability or undesirability of concentrating the litigation of
the claims in the particular forum; and

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(D) the likely difficulties in managing a class action.

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Fed. R. Civ. P. 23(b)(3)(A)–(D); Hanlon, 150 F.3d at 1023.

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a.

Predominance

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“The predominance inquiry asks whether the common, aggregation-enabling, issues

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in the case are more prevalent or important than the non-common, aggregation-defeating, individual

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issues.” Tyson Foods, Inc. v. Bouaphakeo, 136 S. Ct. 1036, 1045 (2016) (citation and internal

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quotation marks omitted); Amchem, 521 U.S. at 623 (“The Rule 23(b)(3) predominance inquiry

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tests whether proposed classes are sufficiently cohesive to warrant adjudication by representation.”)

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(citation omitted). Thus, the court considers “the relationship between the common and individual

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issues.” Hanlon, 150 F.3d at 1022.

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Here, as noted above, the major questions in this case arise from NorthStar’s alleged

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uniform failure to properly calculate wages and overtime, account for meal periods and rest periods,

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and provide reimbursements. See Mot. at 23. While the court may not “rely on uniform policies

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‘to the near exclusion of other relevant factors touching on predominance,’” the current record

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establishes these policies were applied to all putative California Class members, who performed

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the same job functions in the same ways, with no evidence that variance from these policies or other

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“fact-intensive” determinations would prevent the identified major questions from predominating

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in this litigation. See Abdullah v. U.S. Sec. Assocs., Inc., 731 F.3d 952, 965 (9th Cir. 2013)

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(citations omitted).

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b.

Superiority

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“The superiority inquiry under Rule 23(b)(3) requires determination of whether the

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objectives of the particular class action procedure will be achieved in the particular case,” which

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“necessarily involves a comparative evaluation of alternative mechanisms of dispute resolution.”

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Hanlon, 150 F.3d at 1023 (citation omitted). The available alternative resolution here would

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require the 94 class members to bring individual claims to resolve the same questions at the heart

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of this action while bearing the full “cost of litigation, including the inevitable cost of expert

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witnesses if the matter went to trial . . . .” See Mot. at 23. Although plaintiffs contend the costs of

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individual suits “would far outstrip the potential recovery on an individual basis,” they do not

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provide the court with an estimate of the average recovery per class member. See id. Taking the

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net settlement amount estimated for the California Class, $481,111, and dividing that figure by the

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number of putative class members, 94, an average payment to each class member would be

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$5,118.20. That figure will vary depending on each class member’s total number of workweeks.

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See id. at 13 (explaining class members’ settlement amounts will be “based on the total number of

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workweeks worked”). Thus, it is not entirely clear to the court that this sum is so insignificant as

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to make all individual suits pointless, though it seems likely that some class members’ costs of suit

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would likely outweigh their recovery. Cf. Kempen v. Matheson Tri-Gas, Inc., No. 15-CV-00660-

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HSG, 2016 WL 4073336, at *7 (N.D. Cal. Aug. 1, 2016) (finding estimated recovery of $50 for

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one class and $500 for the other “suggest that the incentive to litigate any individual claim is low

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and that class treatment is superior”). At this stage and without any suggestion that individual

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members have a strong interest in the piecemeal pursuit of individual claims arising from uniform

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policies, the class action mechanism will promote efficiency by allowing multiple claims to be

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litigated simultaneously and is thus provides the superior method.

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At this preliminary stage, plaintiffs have satisfied Rule 23(a) and 23(b)(3)’s

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requirements and the motion to preliminarily certify the California Class is GRANTED.

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6.

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Under Rule 23(g), “a court that certifies a class must appoint class counsel.” Fed.

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R. Civ. P. 23(g)(1). Here, as addressed above, plaintiffs’ counsel have experience litigating wage

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and hour class actions and their request to be appointed class counsel is GRANTED.

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B.

Appointment of Class Counsel

The FLSA Group

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The FLSA establishes an opt-in collective action procedure for employees allegedly

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denied wages and overtime pay. See 29 U.S.C. § 216(b). Under the FLSA, “one or more

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employees” may file a civil action “in behalf of himself or themselves and other employees

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similarly situated.” Id.

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The FLSA does not define the term “similarly situated” and the Ninth Circuit only

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recently, and only after this motion was submitted, interpreted that term. See Campbell v. City of

12

Los Angeles, 903 F.3d 1090, 1110–17 (9th Cir. 2018). After rejecting the “minority approach”

13

among district courts, which “treat[ed] a collective as an opt-in analogue to a Rule 23(b)(3) class,”

14

the panel also declined to wholly adopt the majority “ad hoc” approach, which “applies a three-

15

prong test that focuses on points of potential factual or legal dissimilarity between party plaintiffs.”

16

Id. at 1111–13 (emphasis omitted). The panel faulted the latter approach for “offer[ing] no clue as

17

to what kinds of ‘similarity’ matter under the FLSA,” and its “open-ended inquiry into the

18

procedural benefits of collective action [that] invites courts to import, through a back door,

19

requirements with no application to the FLSA.” Id. at 1113-16. Rather, considering the term

20

“similarly situated” in light of the FLSA’s goals, the panel explained:

21

[The FLSA’s] goal is only achieved—and, therefore, a collective can
only be maintained—to the extent party plaintiffs are alike in ways
that matter to the disposition of their FLSA claims. If the party
plaintiffs’ factual or legal similarities are material to the resolution
of their case, dissimilarities in other respects should not defeat
collective treatment.

22
23
24
25

Id. at 1114 (internal citations and emphasis omitted). Thus, “[p]arty plaintiffs are similarly situated,

26

and may proceed in a collective, to the extent they share a similar issue of law or fact material to

27

the disposition of their FLSA claims.” Id. at 1117.

28

/////
13

1

Campbell also approved of district courts’ two-step approach for determining

2

whether a FLSA collective action may proceed. Id. at 1108-10. In the first step, as here, the plaintiff

3

moves for preliminary certification and the district court applies a “lenient [standard] . . . . loosely

4

akin to a plausibility standard,” with the analysis “focused on a review of the pleadings but []

5

sometimes [] supplemented by declarations or limited other evidence.” Id. at 1109. If granted,

6

“preliminary certification results in the dissemination of a court-approved notice to the putative

7

collective action members, advising them that they must affirmatively opt in to participate in the

8

litigation.” Id. In the second step, typically following discovery, the employer may move for

9

decertification, showing the “similarly situated” requirement has not been satisfied, prompting the

10

court to “take a more exacting look at the plaintiffs’ allegations and the record.” Id.

11

Here, plaintiffs contend the FLSA Group members are similarly situated because

12

that group “consists exclusively of Lead and regular [sic] Alarm Installation technicians,” all of

13

whom “were compensated in the same manner” under NorthStar’s compensation policies “and were

14

allegedly denied overtime and minimum wages . . . .” Mot. at 17–18; see SAC ¶¶ 21–23, 111-30.

15

Further, in their prior motion to preliminarily certify the FLSA class, plaintiffs submitted

16

declarations from NorthStar technicians who worked in various locations across the country and

17

attested that in each location they were subject to NorthStar’s policies that give rise to the FLSA

18

minimum wage and overtime claims at issue here. See Gerry Sarabia Decl., ECF No. 33-5

19

(employed as technician in California, Indiana, Texas, Washington, Illinois); Asa Dhadda Decl.,

20

ECF No. 33-6 (employed as technician in California, Indiana, Colorado, Texas, Oklahoma,

21

Illinois); Armando Gomez, Jr. Decl., ECF No. 33-7 (employed as technician in California, Texas,

22

Nevada). Thus, at this preliminary stage, there is sufficient evidence that the putative “party

23

plaintiffs are alike in ways that matter to the disposition of their FLSA claims,” as they held similar

24

jobs with similar functions and were uniformly subject to NorthStar’s compensation policies that

25

led to the alleged FLSA violations here, presenting “similar issue[s] of law or fact material to the

26

disposition of their FLSA claims.” Campbell, 903 F.3d at 1117; see Kempen v. Matheson Tri-Gas,

27

Inc., No. 15-CV-00660-HSG, 2016 WL 4073336, at *4 (N.D. Cal. Aug. 1, 2016) (conditionally

28

certifying FLSA class where complaint alleged “non-exempt delivery drivers were subject to a
14

1

common policy instituted by Defendant that did not factor in bonus pay into the putative class’s

2

overtime pay rate”).

3

For the foregoing reasons, the motion to preliminarily certify the FLSA Group is

4

GRANTED.

5

III.

PRELIMINARY SETTLEMENT APPROVAL

6

Under Rule 23(e), a class action may be settled “only with the court’s approval,”

7

and the court may provide such approval “only after a hearing and only on finding that it is fair,

8

reasonable, and adequate . . . .” Fed. R. Civ. P. 23(e). To assess the fairness of a proposed

9

settlement, courts consider several factors, including:

10

13

(1) the strength of the plaintiff's case; (2) the risk, expense,
complexity, and likely duration of further litigation; (3) the risk of
maintaining class action status throughout the trial; (4) the amount
offered in settlement; (5) the extent of discovery completed and the
stage of the proceedings; (6) the experience and view of counsel;
(7) the presence of a governmental participant; and (8) the reaction
of the class members of the proposed settlement.

14

In re Online DVD-Rental Antitrust Litig., 779 F.3d 934, 944 (9th Cir. 2015) (quoting Churchill

15

Vill., LLC v. Gen. Elec., 361 F.3d 566, 575 (9th Cir. 2004)). While class action settlements always

16

“present unique due process concerns for absent class members” and the “inherent risk [] that class

17

counsel may collude with the defendants,” settlements negotiated prior to class certification present

18

“an even greater potential for a breach of fiduciary duty owed the class during settlement.” In re

19

Bluetooth, 654 F.3d at 946 (citations and internal quotation marks omitted). Such settlements “must

20

withstand an even higher level of scrutiny for evidence of collusion or other conflicts of interest

21

than is ordinarily required under Rule 23(e) before securing the court’s approval as fair.” Id. (citing

22

Hanlon, 150 F.3d at 1026). Should the court find the settlement deficient, it “may suggest changes”

23

but cannot “rewrite” a settlement agreement. M.C.L. § 13.14 (footnotes omitted); Hanlon, 150

24

F.3d at 1026 (court reviews “the settlement taken as a whole, . . . for overall fairness”; “[t]he

25

settlement must stand or fall in its entirety” (citing Officers for Justice v. Civil Serv. Comm’n of

26

San Francisco, 688 F.2d 615, 628 (9th Cir. 1982)).

11
12

27

“FLSA claims may not be settled without approval of either the Secretary of Labor

28

or a district court.” Seminiano v. Xyris Enter., Inc., 602 F. App’x 682, 683 (9th Cir. 2015) (citing
15

1

Nall v. Mal-Motels, Inc., 723 F.3d 1304, 1306 (11th Cir. 2013)). In the absence of Supreme Court

2

or Ninth Circuit guidance, district courts in this circuit often apply the Eleventh Circuit’s standard

3

in evaluating FLSA settlements, assessing whether the settlement is “a fair and reasonable

4

resolution of a bona fide dispute over FLSA provisions.” See Lynn’s Food Stores, Inc. v. U.S. by

5

& through U.S. Dep’t of Labor, Employment Standards Admin., Wage & Hour Div., 679 F.2d 1350,

6

1355 (11th Cir. 1982); Mot. at 18 (applying same standard). “A bona fide dispute exists when there

7

are legitimate questions about ‘the existence and extent of Defendant’s FLSA liability.’” Selk v.

8

Pioneers Mem’l Healthcare Dist., 159 F. Supp. 3d 1164, 1172 (S.D. Cal. 2016) (quoting Ambrosino

9

v. Home Depot. U.S.A., Inc., No. 11cv1319 L(MDD), 2014 WL 1671489 (S.D. Cal. Apr. 28, 2014)).

10

In conducting this inquiry, courts often turn to factors relied on in preliminary certification of Rule

11

23 class actions to the extent those factors apply to FLSA actions. Maciel v. Bar 20 Dairy, LLC,

12

No. 117CV00902DADSKO, 2018 WL 5291969, at *4 (E.D. Cal. Oct. 23, 2018) (citing Khanna v.

13

Inter-Con Sec. Sys., Inc., No. CIV S-09-2214 KJM, 2013 WL 1193485, at *2 (E.D. Cal. Mar. 22,

14

2013)).

15

A.

Obvious Deficiencies

16

At the preliminary approval stage, courts often consider only whether the proposed

17

settlement “(1) appears to be the product of serious, informed, non-collusive negotiations; (2) has

18

no obvious deficiencies; (3) does not improperly grant preferential treatment to class

19

representatives or segments of the class; and (4) falls within the range of possible approval.” Spann

20

v. J.C. Penney Corp., 314 F.R.D. 312, 319 (C.D. Cal. 2016) (citations omitted). To the extent this

21

analysis may be less rigorous than the Churchill inquiry described above, the court is persuaded by

22

a colleague’s observation that “the idea that district courts should conduct a more lax inquiry at the

23

preliminary approval stage seems wrong” and lacks any compelling rationale. See Cotter v. Lyft,

24

Inc., 193 F. Supp. 3d 1030, 1035–36 (N.D. Cal. 2016). Rather, in light of the court’s duty to absent

25

class members, the court should “review class action settlements just as carefully at the initial stage

26

as [it] do[es] at the final stage.” See id. at 1037.

27

Here, however, even a less-than-rigorous analysis reveals “obvious deficiencies” in

28

the settlement that preclude preliminary approval. Namely, the proposed FLSA notice and opt-in
16

1

procedures are fatally flawed. Upon this court’s preliminary approval but prior to its final approval,

2

the parties agree to sending each putative FLSA Group member a check for his or her individual

3

settlement amount, with each check containing the following endorsement:

4

By signing, depositing, and/or cashing this check, I hereby consent
to opt-in to the collective action in Smothers et al. v. NorthStar Alarm
Services, LLC, Case No. 2: 17-cv-00548-KJM-KJN (E.D. Ca.) [sic]
as a party plaintiff pursuant to Section 16(b) of the Fair Labor
Standards Act (“FLSA”) and agree to release NorthStar Alarm
Services, LLC (“NorthStar”) and all Released Parties from all claims,
both known and unknown, that arise out of my employment with
NorthStar under the FLSA, state statutory law (excluding workers’
compensation laws, unemployment compensation laws, and
discrimination laws), or common law (e.g., unjust enrichment,
quantum meruit, etc.) concerning my compensation, hours of work,
pay for those hours of work, or NorthStar's payroll practices.6

5
6
7
8
9
10
11

Settlement §§ VI. 2, VII. 2. But § 216(b) of the FLSA expressly provides that “[n]o employee shall

12

be a party plaintiff to any such action unless he gives his consent in writing to become such a party

13

and such consent is filed in the court in which such action is brought.” 29 U.S.C. § 216(b). Courts

14

more elevated than this one have read the statutory language as requiring written consent filed with

15

the court, albeit not in formal holdings. See Genesis Healthcare Corp. v. Symczyk, 569 U.S. 66, 75

16

(2013) (“The sole consequence of conditional certification is the sending of court-approved written

17

notice to employees, who in turn become parties to a collective action only by filing written consent

18

with the court, § 216(b).”) (citation omitted); Tyson Foods, Inc. v. Bouaphakeo, 136 S. Ct. 1036,

19

1043 (2016) (quoting same to explain why “[t]he size of the class certified under Rule 23 [] was

20

larger than that certified under § 216”); Rangel v. PLS Check Cashers of California, Inc., 899 F.3d

21

1106, 1109 n.1 (9th Cir. 2018) (“A [FLSA] collective is not formed until other plaintiffs file consent

22
23
24
25
26
27

6

In addition to the other problems with the endorsement opt-in approach discussed below, this
release language appears inconsistent with the language provided in the parties’ settlement
agreement, which plaintiffs emphasize is “appropriately tailored” and “releases only those claims
which were or could have been asserted based on the allegations in Plaintiffs’ proposed second
amended complaint, and which arose during the Class Period.” Mot. at 16 (emphasis omitted);
Settlement § I.30 (“Released Claims”). District courts appropriately “routinely reject proposed
class action settlement agreements that try to release all claims in a wage-and-hour case relating
to compensation as overbroad and improper.” Kempen v. Matheson Tri-Gas, Inc., No. 15-CV00660-HSG, 2016 WL 4073336, at *9 (N.D. Cal. Aug. 1, 2016) (collecting cases).

28
17

1

forms with the court joining (that is, ‘opting into’) the original named plaintiff’s case.”) (citations

2

omitted)).

3

Plaintiffs contend their proposed method of opting-in “has been approved by other

4

courts.” Mot. at 19 (citations omitted).7 They are correct, but the decisions they point to are less

5

than satisfying on the crucial question here. One case expressly finds “both the Notice Packet and

6

the check accompanying it sufficiently inform Class Members of their option not to opt in by not

7

cashing the check,” Viceral v. Mistras Grp., Inc., No. 15-CV-02198-EMC, 2016 WL 5907869, at

8

*10 (N.D. Cal. Oct. 11, 2016), but the court there does not appear to have analyzed whether the

9

check-cashing method complied with the requirement of “consent in writing to become such a party

10

. . . filed in the court in which such action is brought.” 29 U.S.C. § 216(b). In other cases plaintiffs

11

cite, courts approved the proposed check-cashing opt-in method with no citation whatsoever to

12

§ 216(b)’s opt-in language. See Lazarin v. Pro Unlimited, Inc., No. C11-03609 HRL, 2013 WL

13

3541217, at *2 (N.D. Cal. July 11, 2013); Franco, 2012 WL 5941801, at *24; del Toro Lopez v.

14

Uber Techs., Inc., No. 17-CV-06255-YGR, 2018 WL 5982506, at *25 (N.D. Cal. Nov. 14, 2018).

15

Plaintiffs also cite cases where the court required employees to first return an opt-in form before

16

receiving settlement checks with opt-in endorsement language, which provides little if any support

17

for plaintiffs’ position that cashing a settlement check alone suffices. See Leverage v. Traeger

18

Pellet Grills, LLC, No. 16-CV-00784-KAW, 2017 WL 2797811, at *4 (N.D. Cal. June 28, 2017);

19

Nur v. Tatitlek Support Servs., Inc., No. 15CV00094SVWJPRX, 2016 WL 3039573, at *3 (C.D.

20

Cal. Apr. 25, 2016). Plaintiffs’ remaining cases either approve the check-cashing opt-in method in

21

cases initially filed as “hybrid” FLSA and Rule 23 class actions, as here, without any reasoned

22

explanation for dispensing with § 216(b)’s requirements, or are ambiguous as to whether FLSA

23

members initially filed written consent with the court. See Gundrum v. Cleveland Integrity Servs.,

24

Inc., No. 17-CV-55-TCK-TLW, 2017 WL 3503328, at *3 n.2 (N.D. Okla. Aug. 16, 2017) (noting

25

settlement stipulating to “certification of a multi-state Rule 23 settlement class,” although

26

endorsement language on check includes release of FLSA claims); Mills v. Capital One, N.A., No.

27
28

7

Plaintiffs filed notices of supplemental authority for this position after this motion was
submitted. See ECF Nos. 46, 54. The court has considered both submissions.
18

1

14 CIV. 1937 HBP, 2015 WL 5730008, at *1, 6-7 (S.D.N.Y. Sept. 30, 2015) (approving distribution

2

of settlement checks to release FLSA claims only after earlier notice advised of “the right of

3

members of the class to opt in to the collective action” and only after court’s final approval).

4

The court has considered whether § 216(b)’s requirement may be satisfied by virtue

5

of the parties’ agreement to have the Settlement Administrator “maintain copies of all negotiated

6

checks . . . and file with the Court at least 14 days prior to the Final Approval and Fairness Hearing,

7

a declaration at the conclusion of the check-cashing period listing the names . . . of all Class

8

Members who signed, deposited, and/or cashed their settlement checks” along with “redacted

9

copies of the cashed checks.” Settlement § VII.2.b. This procedure would provide a type of writing

10

filed with the court, and § 216(b) could be read to allow as much. But such a reading is strained,

11

given the Supreme Court’s reading of the statute as requiring not merely any form of opting-in, but

12

written consent filed with the court. See Genesis Healthcare Corp., 569 U.S. at 75 (employees

13

“become parties to a collective action only by filing written consent with the court”). In contrast,

14

the parties’ proposal would have FLSA collective active members opt-in and receive their

15

settlement in a single stroke and prior to the court’s final settlement determination. Plaintiffs

16

provide no justification for distributing settlement funds before the settlement has been finally

17

approved. While the parties anticipate “issu[ing] a second check to each FLSA Group Member”

18

should the court’s final approval result in a higher than estimated net settlement, they have no plan

19

in place should the court withhold final approval, and thus appear to take for granted the court’s

20

final approval is guaranteed. See id. ¶ VII.2.c. But it cannot be if the court is to do its job, as it

21

will.

22

This court thus joins those that have consulted § 216(b)’s requirements and rejected

23

similar opt-in by settlement check proposals. See Johnson v. Quantum Learning Network, Inc., No.

24

15-CV-05013-LHK, 2016 WL 8729941, at *1 (N.D. Cal. Aug. 12, 2016) (finding settlement

25

provision allowing FLSA members to opt-in by cashing or depositing settlement checks “does not

26

comply with the plain language of the FLSA” and constitutes an obvious deficiency that precludes

27

preliminary approval of Rule 23 and FLSA settlement); Kempen v. Matheson Tri-Gas, Inc., No.

28

15-CV-00660-HSG, 2016 WL 4073336, at *9 (N.D. Cal. Aug. 1, 2016) (same); Robinson v.
19

1

Flowers Baking Co. of Lenexa, LLC, No. 16-2669-JWL, 2017 WL 4037720, at *1 n.1 (D. Kan.

2

Sept. 13, 2017) (same). Cf. Ferreri v. Bask Tech., Inc., No. 15-CV-1899-CAB-MDD, 2016 WL

3

6833927, at *2 & n.1 (S.D. Cal. Nov. 21, 2016) (finding plaintiff’s counsel’s declaration “listing

4

35 individuals who she claims submitted their consent to join the conditional collective action”

5

does not satisfy FLSA’s opt-in requirement).

6

Because the court must approve of or reject the settlement in its entirety, this defect

7

requires the court to DENY the motions to approve both the Rule 23 and FLSA settlements here.

8

As other courts have noted, it appears one way the parties may correct this deficiency is by directing

9

putative FLSA Group members to send opt-in forms to the settlement administrator and then having

10

plaintiffs file those opt-in forms with this court. Johnson, 2016 WL 8729941, at *1; Kempen, 2016

11

WL 4073336, at *9.

12
13
14

In the event plaintiffs renew their motion with a proposed cure to the FLSA opt-in
problem, the court reviews certain remaining factors based on the current record.
B.

Remaining Factors

15

At hearing on this motion, the court requested the parties submit their confidential

16

mediation briefs for in camera review. The court has now reviewed those briefs and considers them

17

in addressing whether the settlement is fair and reasonable, not making any determination as to the

18

merits of plaintiffs’ claims, but in light of the strengths and weaknesses of plaintiffs’ case given the

19

risk and expense of continued litigation and the risk of maintaining class action status throughout

20

the trial.

21

deficiencies within those policies, which plaintiffs contend violated the law and were applied

22

uniformly to technicians. See Mot. at 25–26. Based on its review of the relevant records, plaintiffs

23

provide a $1.16 million estimate of NorthStar’s total potential liability for the California minimum

24

wage and overtime claims alone. Hague Decl. ¶¶ 21-22. But to recover at least $500,000 of that

25

estimate, plaintiffs would need to show NorthStar’s willfulness, id. ¶ 22, and they contend

26

“[d]iscovery to date does not support the conclusion that Defendant’s alleged violation was willful

27

or intentional,” Mot. at 25.

28

compromise the absence of certain records, the existence of non-binding but persuasive adverse

Plaintiffs’ claims are largely premised on NorthStar’s employment policies, or

Moreover, plaintiffs cite as additional weaknesses justifying

20

1

case law addressing similar facts and potential challenges to class certification. Id. In their filings

2

supporting the instant motion, plaintiffs contend these concerns likewise motivated their

3

compromise on the derivative California Labor Code §§ 203, 226 claims, which plaintiffs say they

4

estimated to be worth $127,000 and $318,000, respectively, and their meal and rest period claims,

5

for which they estimated NorthStar’s exposure to be $174,000. Id. at 27; Hague Decl. ¶¶ 24, 26.

6

Their California reimbursement claims, for which plaintiffs estimate NorthStar is liable for

7

$35,000, and travel expenses claims, with NorthStar’s liability estimated at $100,000, required

8

compromise due to missing records and difficulties in proof. Id. ¶ 25. Continued litigation would

9

involve significant expense, as plaintiffs would be required to certify the class, continue discovery

10

and obtain “extensive expert analysis and representative evidence . . . to address various problems

11

of proof.” Id. ¶ 19; see also id. ¶ 22 (noting plaintiffs would attempt to use representative evidence

12

to establish common questions of law or fact predominate under standard outlined in Tyson, 136 S.

13

Ct. at 1047, to overcome absent records). Plaintiffs estimate their FLSA overtime and minimum

14

wage claims’ value at $732,000 and $40,000, respectively, noting these figures account employers’

15

ability to average compensation “on a workweek basis” under federal law, potentially weakening

16

plaintiffs’ claims. Id. ¶ 12. In light of these weaknesses and considering the additional expenses

17

to be incurred in continued litigation, plaintiffs eventually concluded that the mediator’s proposed

18

$1,800,000 global settlement was fair and reasonable. Id. ¶ 28. At this juncture, the court agrees.

19

As to the balance of factors, the court finds no major impediments to approval.

20

Plaintiffs attest to robust discovery preceding settlement. Specifically, plaintiffs cite both formal

21

and informal discovery where the parties exchanged and reviewed “thousands of documents.”

22

Hague Decl. ¶¶ 14, 21. Settlement ultimately resulted from “a highly contentious litigation process

23

and multiple arms length [sic] negotiations with opposing counsel, including a private mediation

24

with . . . a former litigator and judge known for his expertise in the law surrounding complex

25

California wage and hour class actions.” Id. ¶ 18; see Pierce v. Rosetta Stone, Ltd., No. C 11–01283

26

SBA, 2013 WL 1878918, at *5 (N.D. Cal. 2013) (means by which parties reached proposed

27

settlement bears on its reasonableness and fairness). Indeed, although the parties left mediation

28

/////
21

1

without reaching settlement, they “remained in constant contact” with the mediator and ultimately

2

accepted his “global mediator’s proposal . . . .” Hague Decl. ¶ 28.

3

C.

Subtle Signs of Unfairness

4

When, as here, a settlement is negotiated before formal class certification, the court

5

must carefully review the settlement for “subtle signs that class counsel have allowed pursuit of

6

their own self-interests and that of certain class members to infect the negotiations.” In re

7

Bluetooth, 654 F.3d at 947 (citations omitted). These “subtle signs” include: (1) a disproportionate

8

award to counsel, (2) a “clear sailing” arrangement for attorneys’ fees, and (3) arrangements where

9

fees not awarded revert to defendant rather than the class fund. See id. Each sign is present here.

10

1.

11

Plaintiffs seek attorneys’ fees not to exceed 33.33 percent of the gross settlement

12

amount, approximately $600,000. Mot. at 29. This fee amount is above the benchmark for this

13

circuit. See In re Easysaver Rewards Litig., 906 F.3d 747, 754 (9th Cir. 2018) (noting 25 percent

14

benchmark typically used in the Ninth Circuit). The court reserves judgment and notes counsel

15

may ultimately request, and must adequately support to stand a chance of approval, an upward

16

departure from the 25 percent benchmark at any final approval phase. See Powers v. Eichen, 229

17

F.3d 1249, 1256–57 (9th Cir. 2000) (explanation necessary when district court departs from 25%

18

benchmark).

Attorneys’ Fees

19

2.

20

The settlement includes a clear sailing provision in which NorthStar “agrees not to

21

object to [attorneys’] fee, cost or expense applications” that do not exceed 33.33 percent of the

22

gross settlement amount. Settlement § IV.7. This provision raises a red flag, as in all such cases

23

with this kind of agreement.

Clear Sailing Provision

24

Should plaintiffs renew their motion and again include a clear sailing provision, and

25

should the court approve of that renewed motion, the court ultimately will conduct “a lodestar cross-

26

check” in the final fairness hearing to determine whether the request is reasonable. See Ogbuehi v.

27

Comcast of Cal./Colo./Fla./Or., Inc., 303 F.R.D. 337, 352 (E.D. Cal. 2014). Accordingly, the court

28

will require plaintiffs’ counsel’s application for attorneys’ fees to be accompanied by detailed
22

1

descriptions of tasks completed, hours spent on each task, who performed the work, each person’s

2

hourly rate and the total number of hours worked.

3

3.

4

Bluetooth warns courts to be wary of a “kicker” provision under which “all

Reversion Provisions

5

[attorneys’] fees not awarded would revert to defendants rather than be added to the cy pres fund

6

or otherwise benefit the class,” which “amplifies the danger of collusion already suggested by a

7

clear sailing provision.” In re Bluetooth, 654 F.3d at 947, 949. There is no such issue here, at

8

least as to attorneys’ fees. See Settlement § IV.7 (providing attorneys’ fees and expenses not

9

awarded “shall revert to the Net Settlement Amount and be distributed to the Class Members”).

10

But courts are also wary of settlement agreements that would return all unclaimed settlement

11

funds to the defendant. See Trout v. Meggitt-USA Servs., Inc., No. 216CV07520ODWAJW,

12

2018 WL 1870388, at *6 (C.D. Cal. Apr. 17, 2018) (noting such reversionary provisions are

13

“strongly disfavored” and parties must satisfactorily “explain why those funds should revert”)

14

(citations omitted).

15

Under the settlement, if 30 percent or more of the California Class members opt-

16

out, the portion of the net settlement amount that would have been paid to those members will be

17

returned to NorthStar. Settlement § VI.4. Similarly, although NorthStar guarantees payment of 50

18

percent of the FLSA fund, funds for FLSA Group members who do not opt-in will be returned to

19

NorthStar, provided the 50 percent payment is satisfied. Settlement § VII.6. This, too, signals

20

potential unfairness and gives the court pause, though the court notes such provisions are frequently

21

deemed acceptable when justified. See Nur, 2016 WL 3039573, at *3. Plaintiffs only briefly

22

address the reversionary provision, arguing it is necessary to “recogni[ze] that Defendant is not

23

receiving a release.” Mot. at 14; Settlement § VI.4; VII.6. To gain ultimate approval, the proposed

24

terms will need to be more fully explained and justified to eliminate the court’s concerns.

25

IV.

CONCLUSION

26

In light of the foregoing analysis, plaintiffs’ motion to amend, ECF No. 28, and

27

motion to certify class, ECF No. 33, are MOOT. The court resolves ECF No. 39 as follows: it

28

GRANTS plaintiffs’ motions for preliminary certification of the Rule 23 Class, to appoint class
23

1

counsel, and for preliminary certification of the FLSA Group but DENIES plaintiffs’ motion for

2

preliminary approval of the settlement. The court is mindful of the strong judicial policy favoring

3

settlements and the denial is without prejudice to plaintiffs renewing their motion and addressing

4

the issues identified herein. Finally, the court initially scheduled “a further status conference to

5

schedule the balance of the case once class certification is decided,” ECF No. 18, and has since

6

rescheduled that conference multiple times while these motions were pending.

7

VACATES the status conference set for January 25, 2019. The parties are ORDERED to meet and

8

confer as to further motions and/or scheduling necessary in this case and shall file a joint status

9

report within 21 days of this order.

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IT IS SO ORDERED.
DATED: January 22, 2019.

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UNITED STATES DISTRICT JUDGE

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The court