Melgar v. CSK Auto, Inc.

Filing 161

ORDER Conditionally Granting 149 Plaintiffs' Motion for Preliminary Approval. Signed by Judge Edward M. Chen on 6/25/2018. (emcsec, COURT STAFF) (Filed on 6/25/2018)

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UNITED STATES DISTRICT COURT

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NORTHERN DISTRICT OF CALIFORNIA

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OSMIN MELGAR, et al.,
Plaintiffs,

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v.

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CSK AUTO, INC.,

United States District Court
Northern District of California

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Case No. 13-cv-03769-EMC

Defendant.

ORDER CONDITIONALLY
GRANTING PLAINTIFFS’ MOTION
FOR PRELIMINARY APPROVAL
Docket No. 149

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Plaintiffs are former employees of Defendant CSK Auto, Inc. (“CSK”), now known as

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O‟Reilly Auto Enterprises, LLC (“OR”). Plaintiffs filed a class action against OR, claiming that

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the company failed to reimburse Store Managers, Assistant Store Managers, and/or Retail Service

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Specialists for costs incurred in using their personal vehicles to make bank deposits on behalf of

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OR. The operative complaint is the second amended complaint (“SAC”). In that complaint,

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Plaintiffs assert three causes of action: (1) failure to reimburse mileage expenses, see Cal. Lab.

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Code § 2802; (2) unfair and unlawful business practices, see Cal. Bus. & Prof. Code § 17200; and

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(3) violation of the Private Attorney Generals Act (“PAGA”). See Cal. Lab. Code § 2699.

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Currently pending before the Court is Plaintiffs‟ motion for preliminary approval of a class

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action settlement. Under the settlement agreement, the gross settlement amount that OR would

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pay the class is $395,000. Although the gross amount is relatively small, the Court finds that the

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settlement falls within a “„reasonable range of possible settlements,‟” such that the motion for

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preliminary approval may be granted. Tadepalli v. Uber Techs., No. 15-cv-04348-MEJ, 2015 U.S.

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Dist. LEXIS 169076, at *24 (N.D. Cal. Dec. 17, 2015). As reflected in the papers submitted by

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the parties, there are significant litigation risks, including, e.g., whether employees incurred

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business expenses in the first place, whether those employees who did incur such expenses were in

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fact reimbursed, and whether OR had knowledge that personal vehicles were being used to make

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deposits (i.e., employees may have had other options such as walking or using company vehicles).

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These litigation risks inform not only the § 2802 and § 17200 claims but also the PAGA claim.

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The settlement amount attributable to the substantive claims represents approximately 30% of the

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probable maximum verdict value of those claims, a substantial percentage in view of the litigation

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risks. Although the $10,000 attributable to the PAGA claim represents a miniscule percentage of

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the potential maximum PAGA verdict value, there are additional risks specific to the PAGA

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claim, including the lack of willful conduct by OR and the likelihood of a discount taken by the

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Court even if Plaintiffs were to prevail. Most importantly, the compensation for the substantive
claims is sufficiently robust to satisfy the interests underlying PAGA without a substantial PAGA

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United States District Court
Northern District of California

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award. See Viceral v. Mistras Grp., Inc., No. 15-cv-02198-EMC, 2016 U.S. Dist. LEXIS 140759,

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at *28 (N.D. Cal. Oct. 11, 2016) (stating that, “in evaluating the adequacy of a settlement of a

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PAGA claim, courts may employ a sliding scale, taking into account the value of the settlement as

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a whole[;] [t]hus, where a settlement for a Rule 23 class is robust, the statutory purposes of PAGA

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may be fulfilled even with a relatively small award on the PAGA claim itself, because such „a

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settlement not only vindicates the rights of the class members as employees, but may have a

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deterrent effect upon the defendant employer and other employers, an objective of PAGA‟”).

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Although the Court is granting preliminary approval (conditionally, as discussed below), it

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does have some concerns, as it expressed at the hearing. For example, it is debatable whether

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United Way is an appropriate cy pres beneficiary. In addition, there is an argument that the

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requested attorney fee and incentive fees are excessive. However, these issues may be addressed,

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if necessary, at the final approval stage.

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Accordingly, the Court grants preliminary approval. At this juncture, however, the
granting of the motion is conditioned on the following modifications to the settlement.
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The settlement administrator shall maintain a website for the settlement. Although

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this will increase the costs of administration, the parties have not demonstrated that

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the cost is substantial. Moreover, a website will give class members easy access to

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Court documents in the case so that they can evaluate whether to participate in the
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settlement.

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A reminder postcard shall be issued to the class. Although this will increase the

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costs of administration, the parties have not demonstrated that the cost is

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substantial. Nor have they offered evidence to support their claim that a reminder

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postcard does not “substantially increase[e] the claim rate.” Supp. Br. at 12. The

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parties shall meet and confer to discuss the language to be used in the postcard and

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the timing for the postcard to be issued.

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

Class members shall be given 60 days (instead of 45) to respond to the class notice
(especially as the Court is ordering the parties to provide a reminder postcard).

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

Class members shall be given 180 days (instead of 120) to cash checks.

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United States District Court
Northern District of California

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

The Court previously directed the parties to include, in the first paragraph of the

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class notice, the estimated average payout per class member (in bold). The parties

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attempted to address this issue but their modification is insufficient. The statement

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regarding the estimated average payout should be put in the first paragraph in the

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box on page 1 (not in the first paragraph following the box).

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

Previously, the Court directed the parties to clarify in the chart on page 1 of the

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class notice that an objecting class member remains part of the class and should

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still file a claim form in order to receive a payment. The parties made a

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modification but it is not sufficient. The Court directs the parties to use the

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following statement instead: “Prepare and file an objection telling the Court why

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you don‟t agree with the settlement. If you choose this option, you still remain a

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part of the Settlement Class and, therefore, you must still submit a claim form if

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you wish to receive any payment from the settlement. The Court may or may not

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agree with your objection.”

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

Previously, the Court made the same comment as above with respect to Question

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15 in the class notice (page 6). As above, the parties made a modification but it is

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not sufficient. The Court directs the parties to use the following statement instead:

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“If you choose to object, please remember that you are still part of the Settlement
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Class and, therefore, you must still submit a claim form if you wish to receive any

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payment from the settlement. The Court may or may not agree with your

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objection.”
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In the proposed order, page 7, it appears that there is a mistake – i.e., the amount of

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the settlement administration costs should be $22,500, and not $29,000.

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Within a week of the date of this order, the parties shall file an amended proposed class

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notice and an amended proposed order, along with an amended stipulation of settlement reflecting

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the above.

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IT IS SO ORDERED.

United States District Court
Northern District of California

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Dated: June 25, 2018

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______________________________________
EDWARD M. CHEN
United States District Judge

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