Burden v. Selectquote Insurance Services

Filing 117

Order by Magistrate Judge Laurel Beeler granting 106 Motion for Final Approval of Class Action Settlement.(lblc1, COURT STAFF) (Filed on 8/2/2013)

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1 2 3 4 5 6 7 8 UNITED STATES DISTRICT COURT 9 NORTHERN DISTRICT OF CALIFORNIA 10 SAN FRANCISCO DIVISION CHARLES BURDEN, individually and on behalf of other persons similarly situated, No. C 10-5966 LB 12 For the Northern District of California UNITED STATES DISTRICT COURT 11 Plaintiff, ORDER GRANTING MOTION FOR FINAL APPROVAL OF CLASS ACTION SETTLEMENT 13 v. 14 15 SELECTQUOTE INSURANCE SERVICES, a California corporation; and DOES 1 through 10, 16 Defendants. 17 ___________________________________/ 18 19 INTRODUCTION 20 Plaintiff Charles Burden and Defendant SelectQuote Insurance Services agreed to settle the 21 claims in this class action lawsuit involving the alleged erroneous classification of insurance agents 22 as exempt from California law and/or the Fair Labor Standards Act (“FLSA”). See First Amended 23 Complaint (“FAC”), ECF No. 1-4 at 54; Motion for Final Approval of Class Action Settlement 24 (“Motion”), ECF No. 106.1 The district court previously conditionally certified the class, granted 25 the unopposed motion for preliminary approval, and approved the proposed settlement notice. See 26 27 28 1 Citations are to the Electronic Case File (“ECF”) with pin cites to the electronicallygenerated page number at the top of the page. ORDER (C 10-05966 LB) 1 ECF Nos. 100-04.2 After complying with the notice requirements, Plaintiffs moved for final 2 approval and for attorney’s fees and costs. See ECF No. 106. The undersigned held a fairness 3 hearing on August 1, 2013, and grants the unopposed motions. Because the requested amounts are 4 fundamentally fair, adequate and reasonable, the court also awards $250,000.00 in attorney’s fees, 5 $13,868.83 in litigation costs, $8,575.00 in claims administration costs, and a $5,000 incentive 6 award to the named plaintiff. 7 8 9 STATEMENT The procedural facts are in the order granting preliminary approval of the class action settlement, and this order incorporates them by reference. See ECF No. 100 at 1-3. settlement amount of $750,000. Settlement Agreement at 6. After deducting attorney’s fees (up to 12 For the Northern District of California Under the terms of the settlement agreement, SelectQuote will pay a non-reversionary gross 11 UNITED STATES DISTRICT COURT 10 $250,000), litigation costs (up to $20,000), incentive awards (up to $10,000), settlement 13 administration costs (estimated at $9,000), and SelectQuote’s share of payroll taxes arising from the 14 settlement awards, the net settlement amount will be distributed to claimants in the following three 15 subclasses: 16 17 18 19 a. The California Insurance Agent Class, defined as ‘all persons who, at any time between February 9, 2006 and March 31, 2012, were employed by Defendant as an Account Manager (also called ‘insurance agent’) in the State of California’; b. The Nationwide Insurance Agent Class, defined as ‘all persons who, at any time between February 9, 2006 and March 31, 2012, were employed by Defendant as an Account Manager in the United States;’ [and] 21 c. The Former Insurance Agent Class, defined as ‘all persons who were employed by Defendant as an Account Manager in the State of California and whose employment with Defendant ended at any time between February 9, 2007 and October 9, 2012.’ 22 Settlement Agreement at 10-12, 20. Ninety percent of the net settlement amount will be distributed 23 to the California Insurance Agent and Nationwide Insurance Agent classes. Id. at 20. Each member 24 of these classes who submits a timely and valid claim shall be paid a settlement share “based on 25 [SelectQuote’s] calculation of the number of Eligible Overtime hours worked by each Class Member 26 and the Class member’s regular rate or rates of pay applicable to those overime hours worked.” Id. 20 27 28 2 The parties consented to the undersigned’s jurisdiction, and the case was reassigned to this court. See ECF No. 109, 110, 113. ORDER (C 10-05966 LB) 2 1 The remaining 10% of the net settlement amount will be divided equally among the Former 2 Insurance Agent Class members who submit timely and valid claims. Id. Any unclaimed funds will 3 be donated to the Legal Aid Society – Employment Law Center as a cy pres award. Id. at 24. 4 5 6 7 8 9 10 In return, the class members will release SelectQuote from liability for any and all claims that could have been asserted against SelectQuote arising out of or relating to unpaid wages, overtime pay, pay for all time allegedly worked but not compensated, improper wage statements, waiting time penalties, meal or rest break violations, unfair business practices, and practices, and all other claims of any kind for wages, penalties, interest, costs and attorneys’ fees arising from the alleged violation of any provision of common law, California, Florida and/or Texas law and/or Federal law which were or could have been alleged as part of Plaintiffs claims, including but not limited to claims under California Labor Code sections 201, 202, 203, 204, 210, 218, 218.6, 224, 226, 226.3, 226.7, 227.3, 510, 512, 515, 551, 558, 1194, 1197, 1198, 2698 et seq. and 2802, California Business & Professions Code section 17200 et seq., and 29 U.S.C. 18 §§ 207 and 216. 12 For the Northern District of California UNITED STATES DISTRICT COURT 11 Id. at 8. The class member do not release claims for workers compensation, unemployment 13 insurance, or ERISA benefits. Id. 14 After the district court’s preliminary approval, conditional certification of the settlement class, 15 approval of the settlement administrator, approval of the final correct class notice, and setting of the 16 notice schedule, see ECF Nos. 100, 105, SelectQuote provided Dahl Administration, the claims 17 administrator, with information that included the 252 originally-identified class members’ names, 18 addresses, telephone numbers, social security numbers, hire and termination dates, and “the 19 employee specific data required to determine sub-class eligibility and calculate estimated settlement 20 awards for each Class Member.” Dahl Decl., ECF No. 106-4, ¶ 2. Dahl updated the addresses 21 provided by running them through the National Change of Address database and then mailed the 22 court-approved notice packets to the class members on May 13, 2013. Id. ¶¶ 6-7. On June 10, 2013, 23 Dahl mailed reminder postcards to the class members who had not yet submitted a claim form or a 24 request for exclusion. Id. ¶ 8. Sixteen notices were returned as undeliverable and Dahl sent these to 25 a professional address search firm for tracing. Id. Updated addresses were found for thirteen class 26 members and Dahl re-mailed their notice packets. Id. ¶ 9. Updated address information could not 27 be found for three class members, so they were not notified of the settlement. Id. 28 On June 25, 2013, Plaintiff filed his motion for final settlement approval, attorney’s fees, costs, ORDER (C 10-05966 LB) 3 1 and an incentive award. Motion, ECF No. 106. Burden’s motion was filed more than two weeks 2 before the deadline for class members to object. See Dahl Decl. Ex. A, ECF No. 106-4 at 8 (class 3 notice indicating a July 12, 2013 deadline to file objections). 4 On June 27 and July 11, 2013, Dahl mailed additional notice packets to a total of 13 newly- 5 identified class members who were not included in the original class list. Suppl. Dahl Decl., ECF 6 No. 108-2, ¶ 6. Dahl also established a toll-free settlement information line and e-mail address to 7 provide additional information about the settlement. Id. ¶¶ 11-12. 8 As of July 17, 2013, Dahl had received no objections to the settlement and only one class 9 member requested exclusion. Suppl. Dahl Decl., ECF No. 108-2 ¶¶ 7-8. Dahl received 202 claim represents 74% of the 265 class members and 90% of the total available settlement funds. Id. At the 12 For the Northern District of California forms, 196 were valid, and 6 were invalid because they were duplicate claims. Id. ¶ 9. This 11 UNITED STATES DISTRICT COURT 10 hearing, the parties represented that as of the hearing date, no one objected to the settlement. 13 14 15 16 17 ANALYSIS I. JURISDICTION This court has jurisdiction under 28 U.S.C. §§ 1331 and 1441(b). II. NOTICE The court finds that the notice to the settlement class, in the amended form approved by the 18 district court, see ECF Nos. 100 at 9, 102, & 105, provided the best practicable notice to the 19 members of the class (reaching of class members) and satisfied the requirements of due process. As 20 discussed above, the parties employed Dahl Administration, LLC, a claims administrator, to oversee 21 the class notification process. As described above, Dahl mailed notices and reminder postcards to 22 the class members, performed skip traces on all return mail, and verified that the validity of the 23 submitted claims. The court finds that these procedures were adequate. 24 III. CLASS CERTIFICATION 25 For the reasons and under the standards set forth in the district court’s March 21 order, see ECF 26 No. 100, the court finds that the proposed settlement class here still meets the requirements of 27 Federal Rule of Civil Procedure 23(a) and (b). The court certifies the class members set forth above 28 solely for the purpose of entering a settlement in this matter. ORDER (C 10-05966 LB) 4 1 IV. FINAL APPROVAL OF SETTLEMENT AGREEMENT and on finding that it is fair, reasonable, and adequate.” FRCP 23(e)(2). In reviewing the proposed 4 settlement, the court need not address whether the settlement is ideal or the best outcome, but 5 determines only whether the settlement is fair, free of collusion, and consistent with Plaintiff’s 6 fiduciary obligations to the class. See Hanlon v. Chrysler Corp., 150 F.3d at 1027. The Hanlon 7 court identified factors relevant to assessing a settlement proposal: (1) the strength of the plaintiff’s 8 case; (2) the risk, expense, complexity, and likely duration of further litigation; (3) the risk of 9 maintaining class action status throughout the trial; (4) the amount offered in settlement; (5) the 10 extent of discovery completed and the stage of the proceeding; (6) the experience and views of 11 counsel; (7) the presence of a government participant; and (8) the reaction of class members to the 12 For the Northern District of California A court may approve a proposed class action settlement of a certified class only “after a hearing 3 UNITED STATES DISTRICT COURT 2 proposed settlement. Id. at 1026 (citation omitted). 13 The court evaluated the proposed settlement agreement for overall fairness under the Hanlon 14 factors and concludes that preliminary settlement is appropriate. First, the strength of Burden’s case 15 militates in favor of settlement. SelectQuote “vigorously” opposed Burden’s (non-settlement) class 16 certification motion, making settlement an appealing option. See Motion, ECF No. 106 at 10. 17 Second, litigation poses risks, and this litigation (as the docket sheet reveals) has been expensive and 18 protracted. Given the likelihood that SelectQuote would appeal, this factor favors settlement. See 19 id. Third, the amount offered in settlement (between $1,850 and $3,335 per class member) provides 20 real benefits to the class and totals approximately 75% of Burden’s estimated damages. See Karasik 21 Decl., ECF No. 106-1, ¶¶ 11-13. This is a good result for the class in light of the defenses and 22 appellate risks that experienced counsel have identified. See Motion at 10-11. Also, the settlement 23 is the product of serious, non-collusive, arms’ length negotiations by experienced counsel and after 24 three settlement conferences with a magistrate judge. See Motion at 12. 25 The extent of discovery and stage of proceedings also support the settlement agreement. Before 26 settling, the parties engaged in extensive discovery over several years. See generally Docket. The 27 class counsel propounded discovery, the parties took depositions, and engaged in what the district 28 court described as “significant motion practice and litigation beyond that which is typically observed ORDER (C 10-05966 LB) 5 1 2 in wage and hour class actions.” Preliminary Approval Order, ECF No. 100 at 6. Finally, the reaction of class members to the proposed settlement strongly favors approval. An 3 extremely high percentage of the class members submitted claim forms (74%). Suppl. Karasik 4 Decl., ECF No. 108-1 at 2. No class members objected to the settlement and only one opted out. 5 Suppl. Dahl Decl., ECF No. 108-2 at 2-3. 6 In sum, the court finds that viewed as a whole, the proposed settlement is sufficiently “fair, 7 adequate, and reasonable” such that final approval of the settlement is warranted. See Officers for 8 Justice v. Civil Serv. Comm’n of the City and County of San Francisco, 688 F.2d 615, 625 (9th Cir. 9 1982). The court thus approves the settlement agreement. 10 12 For the Northern District of California UNITED STATES DISTRICT COURT 11 V. ATTORNEY’S FEES Burden asks that the court award him $250,000.00 in attorney’s fees, payable out of the gross settlement amount. Motion, ECF No. 106 at 13. 13 A. Legal Standard 14 Rule 23(h) of the Federal Rules of Civil Procedure provides, “In a certified class action, the court 15 may award reasonable attorney’s fees and nontaxable costs that are authorized by law or by the 16 parties’ agreement.” Attorney’s fees provisions included in proposed class action agreements must 17 be “fundamentally fair, adequate and reasonable.” Staton, 327 F.3d at 964. 18 In “common fund cases,” a court has discretion to award attorney’s fees either as a percentage of 19 such common fund or by using the lodestar method. Id. at 967-968. A district court in the Northern 20 District reviewed a number of cases and concluded that using the lodestar method in common fund 21 cases did not achieve the stated purposes of proportionality, predictability and protection of the class 22 but, instead, encouraged abuses such as unjustified work and protracting the litigation. See In re 23 Activision Securities Litigation, 723 F. Supp. 1373, 1378 (N.D. Cal. 1989). Additionally, the 24 percentage-of-the-fund method is appropriate where – as here – the amount of the settlement is fixed 25 without any reversionary payment to the defendant. See Chu v. Wells Fargo Investments, LLC, Nos. 26 C 05-4526 MHP, C 06-7924 MHP, 2011 WL 672645, at *4 (N.D. Cal. Feb. 16,2011). In the Ninth 27 Circuit, the “benchmark” for attorney’s fees in common fund class actions is 25% of the common 28 fund. Staton, 327 F.3d at 968. “The benchmark percentage should be adjusted . . . when special ORDER (C 10-05966 LB) 6 1 circumstances indicate that the percentage recovery would be either too small or too large in light of 2 the hours devoted to the case or other relevant factors.” Six Mexican Workers v. Arizona Citrus 3 Growers, 904 F.2d 1301, 1311 (9th Cir. 1990); see also Vizcaino v. Microsoft Corp., 290 F.3d 1043, 4 1048 (9th Cir. 2002) (explaining that the rate ultimately selected must be supported by findings that 5 take into account all of the circumstances of the case). Class counsel seeks one-third of the gross settlement fund, or $250,000, as an award of 8 attorney’s fees. Motion, ECF No. 106 at 13. Courts in the Ninth Circuit look to the following 9 factors when determining what a proper percentage is for an award of attorney’s fees: (1) the results 10 achieved; (2) the risks of litigation; (3) whether there are benefits to the class beyond the immediate 11 generation of a cash fund; (4) whether the percentage rate is above or below the market rate; (5) the 12 For the Northern District of California B. Attorney’s fees 7 UNITED STATES DISTRICT COURT 6 contingent nature of the representation and the opportunity cost of bringing the suit; (6) reactions 13 from the class; and (7) a lodestar cross-check. Vizcaino, 290 F.3d at 1048-52. 14 Applying these factors to the documentation provided by counsel, and given the extensive 15 litigation in the case and the successful results achieved, the court finds that an upward adjustment 16 of the benchmark to 33% is warranted in this case. As to the results achieved, counsel obtained 17 quality results in the form of a gross settlement amount of approximately 75% of the maximum 18 damages available after significant motions practice. See Order, ECF No. 100 at 6. Counsel 19 assumed substantial risk, litigated the case on a contingent basis, and are receiving fees that are fair 20 considering those factors. Awarding fees at a rate higher than the 25% benchmark is appropriate in 21 cases involving a relatively small settlement fund. See Fees Motion at 13-14 (collecting cases where 22 the district court in this district awarded more than the 25% benchmark in common fund cases); 23 Cicero v. DirecTV, Inc., No. EDCV 07-1182, 2010 WL 2991486, at *6 (C.D. Cal. Jul. 27, 2010) 24 ($10M settlement fund) (collecting cases). The class reaction supports the award. See In re 25 Omnivision Technologies, Inc., 559 F. Supp. 2d 1036, 1048 (N.D. Cal. 2008) (finding factor favored 26 approval where no objections to fee where raised in response to 57,630 copies of notice being sent). 27 The lodestar cross-check does too. The hourly rates ($700 for Gregory Karasik and $475 for 28 Alexander Dychter) are reasonable given their qualifications and reasonable hourly rates in the San ORDER (C 10-05966 LB) 7 1 Francisco marketplace. See Karasik Decl., ECF No. 106-1 at 7.3 Mr. Karasik submitted detailed 2 time records documenting how he expended his 270 hours reasonably. See Karasik Decl. Ex. 3, 3 ECF No. 106-1 at 15-18. Mr. Dychter’s declaration establishes 153 hours in the case, including 4 depositions, settlement conferences, discovery responses, legal research, revisions and strategy, see 5 Dychter Decl., ECF No. 106-2, ¶ 9, and given the extensive litigation that the docket reveals, see 6 Order, ECF No. 100 at 3, the court concludes that the hours are reasonable.4 Also, the $250,000 is 7 less than the total lodestar value of $261,625. See Dychter Decl., ECF No. 106-2, ¶ 10. 8 VI. LITIGATION COSTS 9 Class counsel are entitled to reimbursement of reasonable out-of-pocket expenses. Fed. R. Civ. recover reasonable expenses that would typically be billed to paying clients in non-contingency 12 For the Northern District of California P. 23(h); see Harris v. Marhoefer, 24 F.3d 16, 19 (9th Cir. 1994) (holding that attorneys may 11 UNITED STATES DISTRICT COURT 10 matters.); Van Vranken v. Atl. Richfield Co., 901 F. Supp. 294, 299 (N.D. Cal. 1995) (approving 13 reasonable costs in class action settlement). Class counsel seeks reimbursement of $13,868.83, 14 which is less than the $20,000 maximum under the settlement agreement. See Motion, ECF No. 106 15 at 15. The submissions include records documenting $10,734.05 in costs, invoices from 8/1/2011 - 16 6/17/2013 for $1,417.51 for airfare, attorney services, transportation, and parking, and $1,717.27 in 17 travel-related expenses. See Karasik Decl. Ex. 1, ECF No. 106-1 at 10-11; id. Ex. 2, ECF No. 106-1 18 at 13. The submissions support a total award of costs of $13,868.83. 19 VII. INCENTIVE AWARDS 20 Representative Plaintiff Charles Burden asks for an “enhancement payment” (which the court 21 refers to as an incentive award) of $10,000. Motion at 15. The district court must evaluate a named 22 plaintiff’s award using relevant factors including “the actions the plaintiff has taken to protect the 23 24 3 25 26 Counsel provided only their own declarations regarding the reasonableness of the rates, which ordinarily is not sufficient, see, e.g., Allianz Life Ins. v. Agorio, 852 F. Supp. 2d 1163, 1169 (N.D. Cal. 2012), but the court can rely on its own knowledge and experience regarding the reasonableness of the rates. 27 4 28 It is a very close call as to whether Mr. Dychter’s submissions are detailed enough to allow the court to determine that they are reasonable and thus support the lodestar cross-check. By contrast, Mr. Karasik’s submissions made it easy to evaluate reasonableness. ORDER (C 10-05966 LB) 8 1 interests of the class, the degree to which the class has benefitted from those actions, . . . [and] the 2 amount of time and effort the plaintiff expended in pursuing the litigation.” Staton, 327 F.3d at 977. 3 “Such awards are discretionary . . . and are intended to compensate class representatives for work 4 done on behalf of the class, to make up for financial or reputational risk undertaken in bringing the 5 action, and, sometimes, to recognize their willingness to act as a private attorney general.” 6 Rodriguez v. West Publishing Corp., 563 F.3d 948, 958-959 (9th Cir. 2009). The Ninth Circuit 7 recently emphasized that district courts must “scrutiniz[e] all incentive awards to determine whether 8 they destroy the adequacy of the class representatives.” Radcliffe v. Experian Info. Solutions, 715 9 F.3d 1157, 1163 (9th Cir. 2013). 10 In its preliminary approval order, the district court noted that “Plaintiff’s request for a $10,000 incentive award is double the amount which this Court has determined is presumptively reasoanble. 12 For the Northern District of California UNITED STATES DISTRICT COURT 11 ECF No. 100 at 6 (citing Jacobs v. California State Auto. Ass’n Inter-Ins. Bureau, No. C 07-0362 13 MHP, 2009 WL 3562871, at *5 (N.D. Cal. Oct. 27, 2009) (rejecting a requested $25,000 incentive 14 payment as “quite high for this district, in which a $5,000 payment is presumptively reasonable”)). 15 The district court did not resolve the matter, but advised Plaintiff to address these issues in his 16 motion for final approval. Id. 17 Courts in this district frequently award $5,000 incentive awards, often in larger settlements than 18 this one. See, e.g., Wren v. RGIS Inventory Specialists, No. C-06-05778 JCS, 2011 WL 1230826, at 19 *37 (N.D. Cal. Apr. 1, 2011) (approving $5,000 incentive awards to 24 named plaintiffs in 20 $27,000,000 settlement) supplemented, No. C-06-05778 JCS, 2011 WL 1838562 (N.D. Cal. May 13, 21 2011); In re Mego Fin. Corp. Sec. Litig., 213 F.3d 454, 463 (9th Cir. 2000) (approving $5,000 to 22 two plaintiff representatives of 5,400 potential class members in $1.75 million settlement); Hopson 23 v. Hanesbrands, Inc., No. CV-08-0844 EDL, 2009 WL 928133, at *10 (N.D. Cal. Apr. 3, 2009) 24 (approving $5,000 award to one member of 217 member class from $408,420 settlement amount). 25 Mr. Burden argues that a $10,000 incentive award is justified because he was deposed twice, 26 attended three settlement conferences, and spent a total of 80 hours on this case. Motion at 15-16. 27 He notes that the average payment to the class members is between $1,850 and $3,335, and he 28 asserts that incentive awards are typically “much higher than 3-5 times the average amount of class ORDER (C 10-05966 LB) 9 1 member benefits.” Id. The support for this assertion is his attorney’s declaration. See id.; Karasik 2 Decl., ECF No. 106-1, ¶ 14. 3 But courts often examine whether incentive awards are proportional to the range of settlement 4 awards. See Staton, 327 F.3d at 976. For example, in Wren, the court specifically considered 5 “whether the incentive payments are proportional to the Settlement Amount.” 2011 WL 1838562, at 6 *36. There, the court approved $5,000 settlement awards because some of the individual class 7 members received more than $5,000. Id. at *37. Thus, “although the $5,000 incentive payment 8 amount is greater than the average class member award, it is nonetheless within the range of 9 settlement awards.” Id. member, and even $5,000 exceeds the range of the class members settlements. Nonetheless, on this 12 For the Northern District of California Here, the $10,000 incentive award is nearly three times the largest amount paid to any class 11 UNITED STATES DISTRICT COURT 10 record, the court concludes that $5,000 (in addition to his claim as a class member) is an appropriate 13 amount to compensate Mr. Burden for his efforts.5 14 VIII. SETTLEMENT ADMINISTRATION FEES 15 The settlement agreement said that fees Dahl’s fees will total approximately $9,000. See 16 Settlement Agreement, ECF No. 96 at 9. Kristin Dahl’s declaration establishes that the “final total 17 fees and expenses for this settlement will be $8,575.” Dahl Decl., ECF No. 106-4, ¶ 16. This is 18 reasonable and the court awards it. 19 V. CONCLUSION 20 The court approves the settlement in the total amount of $750,000.00 and awards $250,000.00 in 21 attorney’s fees, $13,868.83 in litigation costs, $8,575.00 in claims administration costs, and a $5,000 22 incentive award to the named plaintiff Charles Burden. 23 This disposes of ECF No. 106. 24 IT IS SO ORDERED. 25 Dated: August 1, 2013 _______________________________ LAUREL BEELER United States Magistrate Judge 26 27 28 5 A different kind of case where the named plaintiff’s efforts are more integral to the litigation might support the approach counsel urges, but this is not that kind of case. ORDER (C 10-05966 LB) 10

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