Myles v. AlliedBarton Security Services, LLC et al

Filing 82

Order by Hon. James Donato denying 77 Motion for Preliminary Approval of Class Action Settlement. (jdlc3S, COURT STAFF) (Filed on 1/9/2015)

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UNITED STATES DISTRICT COURT

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NORTHERN DISTRICT OF CALIFORNIA

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JOAN MYLES,

Case No. 12-cv-05761-JD

Plaintiff,
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v.
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United States District Court
Northern District of California

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ALLIEDBARTON SECURITY SERVICES,
LLC, et al.,

SECOND ORDER DENYING
PRELIMINARY APPROVAL OF CLASS
ACTION SETTLEMENT
Re: Dkt. No. 77

Defendants.

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Plaintiff Joan Myles, on behalf of herself and a putative class of approximately 11,500

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security officers, has sued her former employer, AlliedBarton Security Services, for penalties

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under California Labor Code § 203. The parties previously moved for approval of a proposed

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class settlement, which the Court denied on November 12, 2014. Dkt. No. 68. The Court denied

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the request because the proposed deal was replete with indicia that it would benefit the defendant

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and class counsel at the expense of the absent class members. The parties filed a second proposed

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class settlement on December 12, 2014. See Dkt. No. 77. While they tried to portray the new

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proposal as a fresh start, they failed correct many of the prior problems that doomed the first

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effort. Consequently, the Court denies the proposed class settlement for a second time and

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restores this case to the trial schedule previously ordered.

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The Court detailed in the first order the relevant legal standards and the ways in which the

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prior proposal failed to pass review, and will not repeat that. See Dkt. No. 77. Many of those

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flaws were carried over here. The changes the parties do propose in this round include:

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1. The release covers claims that “could have been pleaded based on the facts and

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legal theories alleged in the operative Complaint,” and does not include federal Fair

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Labor Standards Act claims. See Dkt. No. 77-3 ¶ 81 (underlining indicates added

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United States District Court
Northern District of California

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text).
2. The notice period is increased from 45 days to 90 days, plus an additional 30 days
for notice packets that are re-mailed. Id. ¶ 49.
3. Attorneys’ fees are reduced from 30% of the gross fund to 20% of the gross fund,
or $350,000. See id. ¶ 66.
4. The service payment to the named plaintiff is reduced from $7,500 to $5,000. See
id. ¶ 67.
5. Cy pres recipients are removed, so that if the number of claims result in payouts of
less than 50% of the gross settlement amount, the payments to each of the
claimants is increased until the 50% threshold is reached. See id. ¶ 59.
While these are all marginal improvements, the parties have not addressed the two most

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fundamental issues. First, the settlement amount is extremely low in comparison to the only

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mathematical estimates of liability provided by the parties, and the parties have not provided any

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justification for the steeply discounted settlement amount. Myles estimates total potential liability

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at $18,975,000, based on multiplying the average hourly wage of the putative class ($12.50) by

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their average daily shift of right hours, multiplied by the approximate average delay in payment of

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vacation pay under California Labor Code § 203 (15), multiplied by the average number of people

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in the putative class (11,500), plus a PAGA penalty of $100 per class member and a California

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Labor Code § 226 penalty of $50 class member. See Dkt. No. 77 at 24. The Court realizes, of

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course, that litigation is risky, and that “the very essence of a settlement is compromise, ‘a

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yielding of absolutes and an abandoning of highest hopes.’” Officers for Justice v. Civil Service

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Comm’n of City & Cnty. of San Francisco, 688 F.2d 615, 624 (9th Cir. 1982) (citation omitted).

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But the gross settlement amount -- $1,750,000 -- is a tiny fraction of the total potential liability

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recoverable at trial, and that fraction is reduced right off the top by class counsel fees, settlement

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administrator costs, and a named plaintiff “incentive” before the class members see a penny. Once

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they do, the baseline payment per class member is likely to be around $114. See Dkt. No. 77-1 ¶

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12. And many (probably most) of the putative class members will never make a claim, see

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Nicholas M. Pace and William Rubenstein, “Shedding Light on Outcomes in Class Actions,” in
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Confidentiality, Transparency, and the U.S. Civil Justice System 22, 46 (Joseph W. Doherty,

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Robert T. Reville, and Laura Zakaras, eds., 2008), reducing AlliedBarton’s payout to as little as

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half of the already paltry gross settlement amount. With a statute like California Labor Code §

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203, whose references to “penalties” clearly contemplate a deterrent effect, that is an additional

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strike against the settlement. It is a strike that might be mitigated by a convincing explanation of

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how the settlement amount was arrived at, but no such explanation has been forthcoming from the

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parties.

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Second, because the release covers putative class members who received notice even if
they made no claim for money, “[AlliedBarton’s] liability would be limited on a ‘claims-made’

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basis …. But the release is not imposed on a ‘claims-made’ basis.” Kakani v. Oracle Corp., No.

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United States District Court
Northern District of California

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06-cv-06493-WHA, 2007 WL 1793774, at *5 (N.D. Cal. Jun. 19, 2007). The Court previously

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informed the parties that such a wide disjunction between the scope of the release and the scope of

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liability would be grounds for denial, but the parties did not take that instruction to heart. That, in

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combination with the proposed settlement’s other flaws, necessitates denial of preliminary

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approval.

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The Court has not addressed every problem with the revised settlement here. It set out a

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fuller explanation of the problems with the previous settlement in its prior order, and to the extent

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those problems remain unfixed, they remain factors precluding approval of the revised settlement.

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AlliedBarton mentioned at the hearing that it plans to move for summary judgment. The

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most recent scheduling order in this case sets the deadline for motions for summary judgment and

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motions for class certification as February 9, 2015. See Dkt. No. 76. The parties are expected to

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hold to those deadlines, and to the previously ordered trial schedule.

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IT IS SO ORDERED.
Dated: January 9, 2015
______________________________________
JAMES DONATO
United States District Judge

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