Luo v. Zynga, Inc.

Filing 34

ORDER GRANTING MOTION FOR APPROVAL OF FLSA SETTLEMENT; DISMISSING PLAINTIFFS INDIVIDUAL CLAIMS WITH PREJUDICE; DISMISSING CLASS CLAIMS WITHOUT PREJUDICE 20 32 . Signed by Judge Nathanael Cousins. (lmh, COURT STAFF) (Filed on 1/31/2014)

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UNITED STATES DISTRICT COURT

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NORTHERN DISTRICT OF CALIFORNIA

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SAN FRANCISCO DIVISION

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11 ANDREW LUO,
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Case No. 13-cv-00186 NC
Plaintiff,

ORDER GRANTING MOTION FOR
APPROVAL OF FLSA
SETTLEMENT; DISMISSING
PLAINTIFF’S INDIVIDUAL CLAIMS
WITH PREJUDICE; DISMISSING
CLASS CLAIMS WITHOUT
PREJUDICE

v.

14 ZYNGA INC.,
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Defendant.

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Re: Dkt. Nos. 20, 32

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Plaintiff Andrew Luo and defendant Zynga jointly move for approval of the parties’

19 settlement agreement, dismissal of Luo’s individual claims with prejudice, and dismissal of
20 Luo’s claims on behalf of the proposed class without prejudice. Because the proposed
21 settlement agreement represents a fair and reasonable resolution without prejudice to the
22 putative class, the Court GRANTS the motion.
I. BACKGROUND

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On January 14, 2013, Andrew Luo, a former Zynga software engineer, filed a

25 complaint against Zynga for violations of the Fair Labor Standards Act (“FLSA”) and state
26 wage and hour laws. Dkt. No. 1. The complaint asserts five causes of action: (1) failure to
27 pay wages at the federal overtime rate; (2) failure to pay wages at the California overtime
28 rate; (3) failure to pay all wages upon termination of employment; (4) failure to furnish
Case No. 13-cv-00186 NC
ORDER RE: SETTLEMENT
AND DISMISSAL

1 accurate itemized wage statements; and (5) violation of California’s Unfair Competition
2 Law. Id. ¶¶ 47-83. All of the claims arise from Zynga’s alleged misclassification of
3 plaintiffs as exempt employees. Id. ¶ 18.
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Luo brought the action on behalf of himself and a putative class of all others

5 similarly situated. Id. ¶ 10. The complaint alleged that the action could properly be
6 maintained as a collective action under the FLSA. Id. The complaint defined the proposed
7 class as:
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All persons who worked for Defendant at any time during the four years
prior to the filing of the Complaint, in any of the following positions:
Software Engineer, Quality Assurance (“QA”), Information Technology
(“IT”), or engineering positions with the same or similar job description
and/or similar title as the above referenced positions with Defendant which
involve or include testing, engineering, and/or Quality Assurance duties
and whose duties overlap more than 50% by title, job description, or dayto-day duties.

13 Id. ¶ 11.
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Zynga answered the complaint on March 13, 2013. Dkt. No. 4. The parties

15 exchanged their initial disclosures and produced documents. Dkt. No. 32-1 ¶¶ 2-5. Luo
16 has not moved for class certification.
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Following the exchange of documents, Luo and Zynga entered into negotiations

18 resulting in a settlement of Luo’s claims. Dkt. No. 32 at 4. On May 10, 2013, Luo and
19 Zynga filed a stipulated request for dismissal of this action. Dkt. No. 18. The Court denied
20 the request without prejudice and ordered the parties to file a noticed motion pursuant to
21 Civil Local Rule 7-2. Dkt. No. 19. On June 18, 2013, the parties filed a joint motion for
22 settlement and dismissal of the action. Dkt. No. 20. The motion stated that Luo and Zynga
23 had executed a settlement agreement containing a confidentiality provision preventing its
24 filing as a public record. Id. at 4. The Court ordered the parties to file the settlement
25 agreement under seal in advance of the hearing on the motion. Dkt. No. 23. A hearing was
26 held on August 7, 2013. Dkt. No. 30. No members of the putative class appeared.
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After reviewing the settlement agreement in camera and considering the arguments

28 made by Luo and Zynga at the August 7 hearing, the Court issued an order finding that the
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1 parties had not presented any facts justifying sealing the settlement agreement. Dkt. No.
2 31. The Court gave Luo and Zynga the option of withdrawing their motion seeking
3 approval of the settlement and dismissal of the case, or moving forward with the motion
4 and settlement agreement as part of the public record. Id.
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On November 13, 2013, Luo and Zynga filed a joint motion for approval of the

6 settlement and dismissal. Dkt. No. 32. The motion states that Luo and Zynga have
7 renegotiated their settlement agreement and that they wish to withdraw the previous
8 settlement agreement filed under seal. Id. The Court held a hearing on the motion on
9 January 22, 2014. Again, no putative class members appeared at the hearing.
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This Court has subject matter jurisdiction under 28 U.S.C. § 1331 under the FLSA,

11 29 U.S.C. § 216(b). Dkt. No. 1 at 3. Luo and Zynga have consented to the jurisdiction of a
12 United States magistrate judge under 28 U.S.C. § 636(c). Dkt. Nos. 9, 11.
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II. DISCUSSION

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The Settlement of Luo’s FLSA Claims Is Approved.

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Luo and Zynga assert that the settlement of Luo’s individual FLSA claims against

16 Zynga should be approved, and the claims dismissed with prejudice because the settlement
17 represents “a fair and reasonable resolution of disputed issues of FLSA coverage and
18 potential liability.” Dkt. No. 32 at 6:17-18. An employee’s claims under FLSA are
19 nonwaivable and may not be settled without supervision of either the Secretary of Labor or
20 a district court. Yue Zhou v. Wang’s Restaurant, No. 05-cv-0279 PVT, 2007 WL 2298046,
21 *1 (N.D. Cal. Aug. 8, 2007) (citing Barrentine v. Ark.-Best Freight Sys., Inc., 450 U.S. 728,
22 740 (1981); Lynn’s Food Stores, Inc. v. United States, 679 F.2d 1350, 1352-53 (11th. Cir.
23 1982)). A district court presented with a proposed settlement of FLSA claims “must
24 determine whether the settlement is a fair and reasonable resolution of a bona fide dispute. .
25 . . ‘If a settlement in an employee FLSA suit does reflect a reasonable compromise over
26 issues, such as FLSA coverage or computation of back wages, that are actually in dispute [,]
27 . . . the district court [may] approve the settlement in order to promote the policy of
28 encouraging settlement of litigation.” Id. (quoting Lynn’s Food Stores, 679 F.2d at 1355));
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1 see also McKeen-Chaplin v. Franklin Am. Mortg. Co., No. 1-cv-5243 SBA, 2012 WL
2 6629608, *2 (N.D. Cal. Dec. 19, 2012).
The Court finds that there is a bona fide dispute as to whether Luo was an exempt

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4 employee. Zynga asserts that it has produced documents demonstrating that Luo was
5 exempt from overtime because he “helped to develop the software systems that Zynga uses
6 to manage the translation process, . . . routinely presented ideas for new ways of
7 streamlining that process, and . . . gave work direction to others.” Dkt. No. 32 at 4:18-22.
8 Zynga thus contends that Luo’s claims would fail on the merits. Id. At the hearings on the
9 motion for settlement, the parties also indicated that there is a dispute about the number of
10 work weeks actually worked by Luo, as well as whether there were any overtime hours in a
11 course of any given week because, according to Zynga, for a number of months Luo was
12 working part time from different offices.
Additionally, the Court finds that the settlement agreement reflects a fair and

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14 reasonable compromise of Luo’s FLSA claims. Under the FLSA, if employees work more
15 than 40 hours per week they are entitled to compensation for the overtime at a rate not less
16 than one and one-half times the regular rate of pay. 29 U.S.C. § 207(a)(1). Under the
17 settlement agreement, Luo will receive a payment of $12,000 from Zynga. Dkt. No. 32-1 at
18 9 § 1(a), (c). This payment is for settlement of all of Luo’s claims, not only for his claims
19 under the FLSA. Id. at 9 § 2(c). In response to the Court’s inquiry at the hearing as to how
20 the settlement amount compared to the maximum recovery Luo could have obtained under
21 his FLSA claims if he was found to be non-exempt, Zynga’s counsel estimated that the
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22 settlement payment compensated Luo for about 144 hours of overtime. Zynga’s counsel
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23 further estimated that Luo worked 88 work weeks. The settlement payment thus amounts

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The calculation was based on taking Luo’s annual salary of approximately $115,000, apportioning

25 it over the period he worked to create an hourly rate, multiplying the hourly rate by time-and-a-half
to obtain a time-and-a-half rate, and dividing the time-and-a-half rate into the $12,000 settlement

26 payment.
27 2 Counsel for Zynga stated that while Luo worked elapsed time of 112 weeks, based on badge

swipe data produced in discovery, Luo did not report to work in 24 of those weeks for vacation and

28 other reasons.

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1 to about 1.6 hours per week of overtime paid. The Court concludes that this is a reasonable
2 settlement of Luo’s FLSA claims.
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The Court further finds that the parties have narrowed the scope of the release. In

4 connection with the prior settlement agreement which was filed under seal, the Court noted
5 that it is not inclined to approve a settlement of FLSA claims that includes a broad release
6 provision purporting to release claims unrelated to this litigation, absent a particularized
7 showing that such a broad release in this case is “fair and reasonable.” See McKeen8 Chaplin v. Franklin Am. Mortg. Co., No. 10-cv-5243 SBA, 2012 WL 6629608, at *5 (N.D.
9 Cal. Dec. 19, 2012). In response, Luo and Zynga renegotiated their settlement agreement
10 so that it no longer contains a confidentiality provision preventing the public filing of the
11 agreement, and it narrows the release both in terms of the parties and the claims released.
12 Dkt. No. 32 at 5:12-14.
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The current release provides that, in exchange for the settlement payment, Luo agrees

14 to release “all known and unknown claims . . . whether based in statute, contract, common
15 law, or equity, that [he] may presently have arising out of or related to all claims asserted
16 in this lawsuit and all claims related to leave time for the pregnancy or medical condition
17 of [his] spouse or the birth of [his] child . . . against any Released Party, except as provided
18 in Section 2(e).” Dkt. No. 32-1 at 9 § 2(c) (emphasis added). Unlike the previous release
19 presented to the Court, this release provision generally tracks the claims asserted in this
20 lawsuit, with the exception of the claims related to leave. The Court finds that the
21 inclusion of claims related to leave does not render the settlement of the FLSA claims
22 unfair or unreasonable because there is evidence that Luo’s counsel believed that his client
23 had such potential causes of action but did not amend his complaint because the parties
24 settled before engaging in extensive litigation. Dkt. Nos. 32 at 3:23-27; 32-1 ¶ 3.
25 Furthermore, the parties have narrowed the scope of the release by eliminating from the
26 definition of “Released Parties” companies, partnerships, and joint ventures related to
27 Zynga, as well the stockholders of each such entity. Dkt. No. 32-1 at 9 § 2(b). While the
28 scope of the release is relatively broad, the Court finds that it constitutes a fair and
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1 reasonable resolution, especially in light of the risk that Luo might be found to be exempt
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2 and the substantial payment provided for in the settlement agreement. Accordingly, in

3 furtherance of the policy of promoting settlement of litigation, the Court approves the
4 proposed settlement agreement as to Luo’s FLSA claims.
5 B.

Dismissal of the Putative Class Claims Is Proper.

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In addition to Luo’s agreement to dismiss his claims in this lawsuit with prejudice, the

7 settlement provides for dismissal of the claims of the putative class in the lawsuit without
8 prejudice. Dkt. No. 32-1 at 10 § 3(b). Luo and Zynga contend that the putative, uncertified
9 class claims should be dismissed because there would be no prejudice to the class. Dkt. No.
10 38 at 6-8.
Federal Rule of Civil Procedure 23(e) states that the “claims, issues, or defenses of a

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12 certified class may be settled, voluntarily dismissed, or compromised only with the court’s
13 approval.” Fed. R. Civ. P. 23(e). The court approval requirement has also been applied to
14 settlements made before a class has been certified. Diaz v. Trust Territory of Pac. Islands,
15 876 F.2d 1401, 1408 (9th Cir. 1989); Lyons v. Bank of Am., NA, No. 11-cv-01232 CW,
16 2012 WL 5940846, *1, n.1 (N.D. Cal. Nov. 27, 2012). Before certification, however, the
17 court’s duty to inquire into a settlement or dismissal differs because “the dismissal is not res
18 judicata against the absent class members and the court does not need to perform the kind
19 of substantive oversight required when reviewing a settlement binding upon the class.”
20 Diaz, 876 F.2d at 1408 (citations omitted). To determine whether pre-certification
21 settlement or dismissal is appropriate, “the district court should inquire into possible
22 prejudice from (1) class members’ possible reliance on the filing of the action if they are
23 likely to know of it either because of publicity or other circumstances, (2) lack of adequate
24 time for class members to file other actions, because of a rapidly approaching statute of
25 limitations, (3) any settlement or concession of class interests made by the class
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At the August 8 hearing, Luo’s counsel informed the Court that the attorneys representing Luo are
not receiving attorneys’ fees or a reimbursement of costs from Luo and that no such fees or costs
will be deducted from the settlement payment.
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1 representative or counsel in order to further their own interests.” Id. (citations omitted); see
2 also Lyons, 2012 WL 5940846, *2 (applying the Diaz factors). The central purpose of this
3 inquiry is to determine whether the proposed settlement and dismissal are collusive or
4 prejudicial to absent putative class members. Lyons, 2012 WL 5940846, *2 (citation
5 omitted).
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First, Luo and Zynga argue that it is improbable that any putative class members

7 relied on Luo’s claims to protect their interests. Dkt. No. 32 at 7:2-9. According to the
8 motion for settlement, the news coverage of this action has consisted of three articles in a
9 legal news website, one of which appeared the day after the complaint was filed, and two of
10 which pertained to the settlement of this action. Dkt. No. 32-1 ¶ 7. The lack of publicity
11 makes it unlikely that similarly situated class members knew of the present lawsuit and
12 relied on it for vindication of their own rights. See Mahan v. Trex Co., Inc., No. 09-cv-670
13 JF (PVT), 2010 WL 4916417, *3 (N.D. Cal. Nov. 22, 2010). Furthermore, neither the
14 Court nor any party or counsel has issued any notice to the putative class. Dkt. No. 32-1 ¶
15 8. Counsel for Luo and Zynga reported that they have not been contacted by any members
16 of the putative class, and no such class members appeared at the hearings held by the Court
17 in connection with the motion for settlement. The Court agrees that it is unlikely here that
18 absent putative class members have relied on the filing of this action.
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Second, the putative class members’ claims would not be time-barred because of the

20 tolling of the statute of limitations. See Am. Pine and Constr. v. Utah, 414 U.S. 538, 554
21 (1974) (holding that “the commencement of a class action suspends the applicable statute of
22 limitations as to all asserted members of the class who would have been parties had the suit
23 been permitted to continue as a class action.”). Third, Luo does not seek to dismiss the
24 class claims with prejudice and, therefore, the rights or claims of the putative class members
25 are not compromised. See Lyons, 2012 WL 5940846, at *2.
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Finding no evidence of collusion or prejudice to the putative class members, the

27 Court concludes that each of the Diaz factors weighs in favor of approving the dismissal of
28 the class claims without prejudice, and that dismissal is appropriate without notice to the
7

e
F
09
ment
ividual claim and
ms
1 putative class. See Diaz, 867 F.2d at 140 (holding that settlem of indi
al
a
w
tice
opriate “so l
long as the representat
tive
2 dismissa of class allegations without not is appro
fs
ceive dispro
oportionate recoveries and the abs class m
sent
members do not
o
3 plaintiff do not rec
rejudice”); see also Ca
astro v. Zen Acquisition Corp., No. 06-cvnith
-04163 SI, 2
2007
4 suffer pr
905,
D.
finding that notice to c
t
class of pre-certificatio
on
5 WL 819 *1 (N.D Cal. Jan. 9, 2007) (f
al
r
here
w
udice to the potential class membe
ers).
6 dismissa was not required wh there was no preju
III. CONCLUS
C
SION

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Th Court fin that the settlement agreement between L and Zyn with res
he
nds
Luo
nga
spect to

LSA
s
nd
ble
on
a
ute.
ourt
9 Luo’s FL claims is a fair an reasonab resolutio of a bona fide dispu The Co
f
he
nt
nt
llusive and does not pr
rejudice the
e
10 further finds that th settlemen agreemen is not col
0
e
cordingly, th parties’ request to w
he
r
withdraw th previou settlemen
heir
us
nt
11 putative class. Acc
1
ent
der
G
D.
ement of Lu FLSA claims is
uo’s
12 agreeme filed und seal is GRANTED The settle
2
’s
al
e
SED
CE,
e
13 APPROVED, Luo’ individua claims are DISMISS WITH PREJUDIC and the class
3
laims are DISMISSED WITHOU PREJUD
D
D
UT
DICE. Each side is to b its own costs
h
bear
14 action cl
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15 and attorneys’ fees.
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IT IS SO OR
T
RDERED.

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Date: January 31, 2014
y

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_____
__________
__________
____
Nath
hanael M. C
Cousins
Unit States M
ted
Magistrate J
Judge

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