Conde et al v. 2020 Companies LLC et al
Filing
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ORDER Regarding #297 MOTION for Settlement Approval. Signed by Judge Kandis A. Westmore on 8/28/2018. (kawlc2, COURT STAFF) (Filed on 8/28/2018)
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UNITED STATES DISTRICT COURT
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NORTHERN DISTRICT OF CALIFORNIA
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CARLOS CONDE, et al.,
Plaintiffs,
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ORDER REGARDING MOTION FOR
SETTLEMENT APPROVAL
v.
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OPEN DOOR MARKETING, LLC, et al.,
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United States District Court
Northern District of California
Case No. 15-cv-04080-KAW
Defendants.
Re: Dkt. No. 297
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Plaintiffs Shikwana Jennings and Lisa Drake filed this putative class and collective action
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against Defendants 20/20 Communications, Inc. ("20/20"), Open Door Marketing, LLC ("Open
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Door"), Larry Clark, and Jerrimy Farris, alleging violations of the Fair Labor Standards Act
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("FLSA") and various California labor laws. (Fourth Amended Compl. ("FAC") ¶¶ 1-2, Dkt. No.
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195.) On August 16, 2018, the Court held a hearing on Plaintiffs' unopposed motion for
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settlement approval, which seeks to settle the claims of Plaintiffs and the 176 individuals who
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opted in to the collective action. (Plfs.' Mot. for Settlement Approval, Dkt. No. 297; Dkt. No.
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308.)
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Having considered the papers filed by the parties, the relevant legal authority, and the
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arguments advanced by counsel, the Court intends to deny the motion for settlement approval.
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While the parties addressed most of the Court's concerns, including the scope of Section V of the
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Settlement Agreement and Release, the Court continues to have concerns that the proposed release
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is overbroad. Specifically, the parties seek to release any wage and hour claims that were raised or
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could have been raised in the operative complaint. As noted by the Court, however, courts in this
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district "routinely reject FLSA settlements when the scope of the release goes beyond the overtime
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claims asserted in the complaint." Dunn v. Teachers Ins. & Annuity Ass'n of Am., Case No. 13-cv-
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5456-HSG, 2016 WL 153266, at *5 (N.D. Cal. Jan. 13, 2016) (collecting cases); see also Daniels
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v. Aeropostale W., Inc., Case No. 12-cv-5755-WHA, 2014 WL 2215708, at *4 (N.D. Cal. May 29,
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2014) (rejecting release that would release all claims, known or unknown, based on the alleged
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facts arising out of or relating to the facts alleged in the operative complaint . . . ."); Slezak v. City
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of Palo Alto, Case No. 16-cv-3224-LHK, 2017 WL 2688224, at *4 (N.D. Cal. June 22, 2017) ("A
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FLSA release should not go beyond the specific FLSA claims at issue in the lawsuit itself");
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Gonzalez v. Fallanghina, LLC, Case No. 16-cv-1832-MEJ, 2017 WL 1374582, at *6 (N.D. Cal.
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Apr. 17, 2017) (approving the FLSA settlement only after the parties "agreed to narrow the release
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subject to court approval to the claims at issue in the [operative complaint]").
At least one district court has rejected a FLSA settlement that would release any and all
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United States District Court
Northern District of California
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claims for wage payment that were raised or could have been raised in the complaint. Otey v.
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CrowdFlower, Inc., Case No. 12-cv-5524-JST, 2014 WL 1477630, at *7 (N.D. Cal. Apr. 15,
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2014). There, the district court found that the release went "beyond the scope of the present
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litigation to include any and all claims for wage payments that either were raised or that could
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have been raised, and it further states that the claims itemized in the release are illustrative but not
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exhaustive." Id. (internal quotation omitted). Here, the release is similar to that in Otey, as it
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would release claims that were or could have been alleged in the Fourth Amended Complaint.
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(Liss-Riordan Decl., Exh. A ("Settlement Agreement") ¶ III.A, Dkt. No. 297-1.) The Settlement
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Agreement also lists various types of claims that would be released, but states that those claims are
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not exhaustive. (Id.)
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At the hearing, Defendant 20/20 distinguished Otey by pointing to Selk v. Pioneers
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Memorial Healthcare District as a case where the district court approved a settlement that released
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claims not pled in the complaint because additional consideration was given to the California opt-
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in plaintiffs.1 See 159 F. Supp. 3d 1164 (S.D. Cal. 2016). A careful reading of Selk, however,
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does not suggest that this settlement released claims outside of the complaint. Indeed, in
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Defendant 20/20 also cited to Walsh v. CorePower Yoga LLC, Case No. 16-cv-5610-MEJ, 2017
WL 589199 (N.D. Cal. Feb. 14, 2017). As Defendant 20/20 acknowledged, however, this was a
class action lawsuit, and the district court applied the class action standard in reviewing the release
language. See id. at *10.
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discussing the scope of the release provision, the district court explained that "when a FLSA
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settlement provides that opt-in members will receive unpaid wages and related damages, but
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nothing more, a release provision should be limited to the wage and hour claims at issue.
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[Citation.] Only when opt-in plaintiffs receive independent consideration, or provide specific
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evidence that they fully understand the breadth of the release, will a broad release of claims
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survive a presumption of unfairness." Id. at 1178 (emphasis added). Notably, the district court
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ultimately found that the release was adequate because "[a]t oral argument, counsel for
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[Defendant] represented to the court that the release requires waiver of only the wage and hour
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claims alleged, and not unrelated claims." Id. (emphasis added). There was no finding by the
district court that a release outside of the alleged claims was justified by any additional
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United States District Court
Northern District of California
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independent consideration to the California opt-ins. The district court did, however, approve of a
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separate settlement agreement between the named plaintiff and the defendant, in which the named
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plaintiff received a separate release payment of $5,500 to enter into a broad release of claims. Id.
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at 1179.
Here, Plaintiffs stated in their supplemental belief that "[t]he parties have agreed to allocate
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a double share to California workweeks in light of the California state law claims which were
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asserted in this case, and in recognition of the additional remedies afforded by California law that
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the Nevada opt-ins would not have been able to obtain." (Plfs.' Supp. Brief at 1, Dkt. No. 303.) In
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other words, the double share is simply an acknowledgment that the California opt-ins are already
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entitled to a higher proportion of the settlement because they are releasing California-specific
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claims that are pled in the complaint itself. This is distinguishable from a showing that any of the
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opt-in Plaintiffs are receiving independent consideration for the claims that were not pled in the
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operative complaint. Without independent consideration for such claims, and given that the Court
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has not been able to locate any decision in this district that approved a settlement of the parties'
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proposed scope, the Court will not approve the settlement agreement as written.2
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There is also no showing that all of the opt-in Plaintiffs fully understood the breadth of the
release. At the hearing, Plaintiffs stated that they had informed the opt-in Plaintiffs that the
settlement was for federal and state claims. The July 3, 2018 notice, however, does not appear to
explicitly state that the opt-in Plaintiffs are giving up claims that were not raised in the lawsuit.
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Accordingly, the Court ORDERS the parties to file a joint status report, by September 12,
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2018, stating whether they will limit the scope of the release to the claims asserted in the operative
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complaint. If the parties are not so inclined, the Court will issue its order denying Plaintiff's
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motion for settlement approval.
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IT IS SO ORDERED.
Dated: August 28, 2018
__________________________________
KANDIS A. WESTMORE
United States Magistrate Judge
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United States District Court
Northern District of California
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(See Liss-Riordan Decl., Exh. B.) Even if such information was contained in the notice, the fact
that the opt-in Plaintiffs were informed of the provision is not specific evidence that every opt-in
Plaintiff understood the significance of the proposed release.
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