Thompson v. Costco Wholesale Corporation et al

Filing 66

ORDER Denying 64 Renewed Motion for Preliminary Approval of Class Action Settlement. Signed by Judge Cathy Ann Bencivengo on 4/26/2017. (jjg)

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UNITED STATES DISTRICT COURT

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SOUTHERN DISTRICT OF CALIFORNIA
DOUGLAS THOMPSON on behalf of
himself, others similarly situated, and the
general public,

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Case No.: 14-cv-2778-CAB-WVG
ORDER DENYING RENEWED
MOTION FOR PRELIMINARY
APPROVAL OF CLASS ACTION
SETTLEMENT

Plaintiff,
v.
COSTCO WHOLESALE
CORPORATION,
Defendant.

[Doc. No. 64]

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This matter is before the Court on Plaintiff’s second attempt to obtain approval of a

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class action and FLSA collective action settlement with Defendant Costco Wholesale

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Corporation (“Costco”). The Court denied Plaintiff’s first attempt primarily because it

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wholly ignored to distinctions between the Rule 23 class and the FLSA collective that the

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named plaintiff and counsel seek to represent. Among other things, the settlement did not

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have a proper opt-in procedure for the FLSA collective and would have required Rule 23

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class members to release FLSA claims in exchange for no consideration simply to

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participate in the settlement of the Rule 23 class claims. Although this renewed motion

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corrects some of the shortcomings of the original settlement by creating a separate

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settlement fund for the FLSA collective and including an appropriate opt-in procedure for
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the FLSA collective, the release language remains inadequate. Accordingly, Plaintiff’s

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motion is once again denied.

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First, although the settlement agreement contains a separate release of FLSA claims

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for participating collective members [Doc. No. 64-1 at 36], it still defines the “Released

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Claims” by participating class members as including “any claims under federal law and

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state law” that could have been alleged. [Doc. No. 64-1 at 35.] The FLSA, of course, is a

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federal statute. Thus, participating class members would be releasing FLSA claims

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regardless of whether they participate in the collective.

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Accordingly, the parties must specify that FLSA claims are not included within the

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This is impermissible.

definition of Released Claims.

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Second, the section of the agreement with the heading “Release of Claims by

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Participating Class Members” contains the following sentence: “The Parties stipulate that

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Costco shall not owe, beyond the amount of the Gross Settlement Fund, any further monies

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to the Settlement Class or to the State of California based upon the claims made in the

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Lawsuit during the Settlement Period.” [Doc. No. 64-1 at 36.] FLSA claims were made

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in this lawsuit. Thus, this stipulation effectively amounts to a release of FLSA claims by

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Rule 23 class members, regardless of whether they opted in to the FLSA collective.

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Third, the motion itself and the Turley declaration both state that “the procedures

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adopted under the Agreement will operate as a release of any FLSA claim by those

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Settlement Class Members who cash, deposit, or endorse settlement checks.” [Doc. No.

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64 at 19; 64-1 at 11, ¶ 36.] There is no citation to a provision in the Agreement that leads

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to this result, but if this is the intent of the settlement, it is impermissible. The only

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individuals who should be releasing any FLSA claim should be those who have opted in to

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the FLSA collective.

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These deficiencies further underscore the difficulty (if not impossibility) of

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maintaining a Rule 23 class action and an FLSA collective action in the same lawsuit. Cf.

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Pitts v. Terrible Herbst, Inc., 653 F.3d 1081, 1093 (9th Cir. 2011) (declining to review the

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district court’s holding that a Rule 23 class action and FLSA collective action cannot co2
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exist, because the plaintiff abandoned the FLSA claim). Ultimately, however, any effort

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to settle the claims of a Rule 23 class as well as FLSA claims in a collective manner using

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only one settlement agreement must account for these differences. Although the parties

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may choose the language to remedy these deficiencies, the easiest way to do so might be

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to include an express statement in the release that notwithstanding any other terms in the

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agreement, participating class members who do not opt-in to the FLSA collective do not

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release any FLSA claims against Costco.

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In light of the above, it is hereby ORDERED that Plaintiff’s Unopposed Renewed

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Motion for Preliminary Approval of Class Action Settlement is DENIED. Plaintiff may

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file a renewed motion for preliminary approval on or before May 10, 2017.
It is SO ORDERED.
Dated: April 26, 2017

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