Jesus Perez v. CRST International, Inc. et al

Filing 86

ORDER granting in part and denying in part 83 Motion for Approval of Settlement: The Court grants the parties' motion to dismiss the plaintiff's individual claims with prejudice, to dismiss the class claims without prejudice, and the Court approves the settlement as to the class claims. The parties' motion for an order approving the terms of the settlement of plaintiff's theoretical FLSA claims is denied. Signed by Judge CJ Williams on 5/31/2019. (pac)

IN THE UNITED STATES DISTRICT COURT
FOR THE NORTHERN DISTRICT OF IOWA
CEDAR RAPIDS DIVISION
JESUS PEREZ, as an individual, on
behalf of himself, all others similarly
situated, and the general public,
Plaintiffs,

No. 18-cv-23-CJW-KEM
ORDER

vs.
CRST INTERNATIONAL, INC.; CRST
EXPEDITED, INC.; and DOES 1-100,
inclusive,
Defendants.
____________________

This matter is before the Court on the parties’ Joint Motion for Approval of
Settlement. (Doc. 83). The parties ask the Court to approve the terms of the settlement
agreement, dismiss plaintiff’s individual claims with prejudice, and dismiss plaintiff’s
class claims without prejudice. (Docs. 83, at 1; see also Doc. 83-2, at 7 (settlement
agreement contemplating judicial dismissal of the subject claims)). The Court held a
telephonic hearing on May 28, 2019, and no potential class members appeared. (See
Doc. 85).
Plaintiff’s complaint alleges ten California state law claims. (Doc. 75). The
complaint does not allege any other state law claims or federal claims. (See id.). The
parties filed cross motions for a determination of the applicable body of law (Docs. 69,
70), and on December 20, 2018, the Court determined that Iowa law, not California law,
applies to plaintiff’s claims (Doc. 77, at 20). Perez v. CRST Int’l, Inc., 355 F. Supp. 3d
765 (N.D. Iowa 2018). Roughly six weeks later, the parties informed the Court that this

case had settled (see Doc. 78), and the parties subsequently brought the current motion.
No party has moved for class certification, and the class has not been certified.
For the following reasons, the Court grants the parties’ motion to dismiss
plaintiff’s individual claims with prejudice, to dismiss the class claims without prejudice,
and the Court approves the settlement as to the class claims. The parties’ motion for an
order approving the terms of the settlement of plaintiff’s theoretical FLSA claims is
denied.
I.

APPLICABLE LAW

“The claims . . . of a certified class . . . may be settled [or] voluntarily dismissed
. . . only with the court’s approval.” FED. R. CIV. P. 23(e). “If the proposal would bind
class members, the court may approve it only after a hearing and only on finding that it
is fair, reasonable and adequate . . ..” FED. R. CIV. P. 23(e)(2). The Eighth Circuit
Court of Appeals requires court approval under Rule 23 even when a class has yet to be
certified. Crawford v. F. Hoffman-La Roche Ltd., 267 F.3d 760, 764 (8th Cir. 2001)
(citations omitted). Although Rule 23(e) generally requires a court to provide notice to
class members before approving a settlement, “notice is not necessarily required if a class
has not been certified.” Crawford, 267 F.3d at 764-65 (citations omitted).
The Court “acts as a fiduciary [that] must serve as a guardian of the rights of
absent class members,” and the Court cannot accept a settlement that is not fair,
reasonable, and adequate. Grunin v. Int’l House of Pancakes, Inc., 513 F.2d 114, 123
(8th Cir. 1975) (citations omitted). To determine whether a settlement is fair, reasonable,
and adequate under Rule 23(e), the Eighth Circuit directs district courts to consider four
factors: “1) the merits of the plaintiff’s case weighed against the terms of the settlement,
2) the defendant’s financial condition, 3) the complexity and expense of further litigation,
and 4) the amount of opposition to the settlement.” Marshall v. Nat’l Football League,
787 F.3d 502, 508 (8th Cir. 2015) (citation and internal quotation marks omitted). The

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balance of the merits of the plaintiff’s case against the settlement terms is the most
important consideration. Id. (citation omitted).
Additionally, this Court has previously measured whether a dismissal is
appropriate under Rule 23 by considering the following factors: “1) the circumstances
leading to the decision to voluntarily dismiss the class action; 2) any settlement or
concession of class interests made by the class representative(s) or counsel; 3) class
members’ possible reliance on the filing of the action if they are likely to know of it either
because of publicity or other circumstances; 4) amount of time for class members to file
other actions in view of applicable statute(s) of limitations; and 5) any other factors
bearing on possible prejudice or loss of benefit to the absent class members created by
the dismissal.” Schultzen v. Woodbury Cent. Cmty. Sch. Dist., 217 F.R.D. 469, 471
(N.D. Iowa 2003) (citation omitted).
II.
A.

ANALYSIS

Class Claims

Consistent with Eighth Circuit precedent, the Court will consider each factor set
forth under Marshall. The parties’ motion, however, contemplates the five enumerated
Schultzen considerations, and the Court will review each Schultzen factor in addition to
the Marshall factors. The Court finds that the settlement is fair, reasonable and adequate
under both sets of factors.
1.

Marshall Factors

The first factor under Marshall considers “the merits of the plaintiff’s case
weighed against the terms of the settlement.” 787 F.3d at 508. As currently pled,
plaintiff’s claims address only California law, and based on plaintiff’s request that the
Court apply California law, this case appears to have been litigated strictly considering
California law thus far. (See Docs. 69; 75). In addressing the parties’ cross motions for
a determination of whether Iowa law, as opposed to California law, governs, the Court

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found that Iowa law and California law are truly in conflict with respect to each of
plaintiff’s ten claims. Perez, 355 F. Supp. 3d at 770-72. Specifically, the Court found
that Iowa law is in conflict with California law on plaintiff’s claim under California’s
Private Attorneys General Act because “Iowa has no law that is analogous” to the
California law. Id. at 770-71. The Court went on to address the remaining nine claims,
all of which are based on the distinction between an employee and an independent
contractor. Id. at 771-72. The Court found that “[a]lthough there is a significant degree
of overlap between the tests employed by Iowa and California, the tests are not identical.”
Id. at 772. The Court ultimately concluded that Iowa law governs this case. Id. at 779.
The Court’s determination that Iowa law governs this case effectively defeated
each of plaintiff’s claims because each claim was pled under California law, which is
inapplicable here. The California claims, then, failed as a matter of law. To pursue this
case plaintiff would either have to reform his complaint to allege claims under Iowa law,
or plaintiff could pursue claims under federal law. Plaintiff has not endeavored to do
either.
Plaintiff indicates that he “explored” amending his complaint to assert claims
under Iowa law and the federal Fair Labor Standards Act (“FLSA”) after the Court
determined that California law is inapplicable to this case. (Doc. 83-1, at 3). Plaintiff
has not, however, moved for leave to amend his complaint. As stated above, California
and Iowa have adopted different tests to assist a court in determining whether an
individual is an employee as opposed to an independent contractor. The Court now adds
that the test employed under the FLSA is different from the test used by either state.
Compare Rutherford Food Corp. v. McComb, 331 U.S. 722, 730 (1947) (holding that
the nature of an employment relationship depends on “the circumstances of the whole
activity”) with Perez, 355 F. Supp. 3d at 771-72 (summarizing the California and Iowa

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standards for determining the nature of an employment relationship; both standards apply
some version of an “extent of control” test).
The crux of plaintiff’s complaint, as to nine claims, 1 is defendant’s alleged practice
of misclassifying the class members as independent contractors, rather than as employees.
(Doc. 75, at 6). To succeed on plaintiff’s current theory, then, plaintiff would have to
demonstrate that the class members were misclassified as independent contractors.
Making this showing would require plaintiff to apply the facts of this case to either Iowa
law or federal law to show that the class was misclassified under either body of law or
both bodies of law. Because each of the three bodies of law—California law, Iowa law,
and federal law—apply a different standard in determining the nature of an employment
relationship, plaintiff would have to develop different arguments to succeed under any
one body of law.
Until the Court determined that Iowa law governs this case, plaintiff argued his
case under California law. The Court’s determination that Iowa law governs necessarily
meant that for plaintiff to succeed, plaintiff would have to develop entirely different legal
arguments to demonstrate that the class members were truly misclassified as independent
contractors. Defendants, likewise, would have to develop entirely new legal arguments

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The only claim that is not premised on the distinction between an employee and an independent
contractor is plaintiff’s claim under California’s Private Attorneys General Act, CAL. LAB. CODE
§§ 2698, et. seq. That claim, however, is based on a statute that is specific to California. A
California Private Attorneys General Act claim is a type of qui tam action, and “a portion of the
penalty goes not only to the citizen bringing the suit but to all employees affected by the Labor
Code violation.” Iskanian v. CLS Transp. Los Angeles, 327 P.3d 129, 148 (Cal. 2014). Neither
Iowa law nor federal law recognizes an analogous cause of action. A private FLSA claim could
bear some similarities to plaintiff’s current claim under the California Private Attorneys General
Act, but asserting a private FLSA claim would still require plaintiff to adopt a significantly
modified litigation strategy. Thus, the Court’s analysis as to the Private Attorneys General Act
claim reaches the same conclusion as the Court’s analysis on the remaining nine claims.

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in response. When viewed in this light, the Court is persuaded that the merits of
plaintiff’s case, as the case is currently pled, are weak. Although the settlement amount
the parties have agreed upon is not a high figure, the Court concludes that the settlement
amount, when balanced against the merits of plaintiff’s case, counsels in favor of
approving the settlement.
Additionally, the third and fourth factors that were articulated in Marshall weigh
in favor of approving the settlement.

The third factor addresses the expense and

complexity of continued litigation. Marshall, 787 F.3d at 508. As articulated above,
plaintiff’s claims, as currently pled, must fail. For this case to survive, plaintiff would
have to introduce claims based on a different body of law. Because of the differences
between Iowa law or federal law, and California law, the potential amendments would
require plaintiff to develop a new litigation strategy, and all parties would incur
substantial expenses in pursuing this case under an altered course. Finally, neither party,
nor any potential class members, oppose the settlement. See id. (fourth factor requires
the Court to consider any opposition to a settlement).
The second factor—defendants’ financial condition—is the only factor that may
counsel against approving the settlement. See id. The Court has not been provided with
information regarding defendants’ financial condition, and the Court will not speculate
as to defendants’ ability to offer a higher settlement figure. Even assuming defendants
are financially capable of further litigation or of making a higher settlement payment, the
balance of factors is weighted heavily in favor of finding that the settlement is fair,
reasonable, and adequate. Finally, when reviewing a class settlement, the Court is tasked
with “ensur[ing] that the agreement is not the product of fraud or collusion and that,
taken as a whole, it is fair, adequate, and reasonable to all concerned.” In re Wireless
Tel. Fed. Cost Recovery Fees Litig., 396 F.3d 922, 934 (8th Cir. 2005) (citation omitted).

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Here, the Court finds no evidence of collusion or fraud, and the balance of factors leaves
the Court satisfied that the settlement is fair, reasonable, and adequate.
2.

Schultzen Factors

Although the Marshall factors are determinative here, the parties have addressed
the Schultzen factors. The Court will discuss both in the interest of giving all issues full
consideration. The first Schultzen factor assesses “the circumstances leading to the
decision to voluntarily dismiss the class action.” 217 F.R.D. at 471. The parties point
to this Court’s determination that Iowa law, rather than California law, applies in this
case. (Doc. 83-1, at 3). As discussed above, that determination meant that plaintiff
would have to pursue his claims under either Iowa law or federal law instead of California
law.
Litigating this case under either Iowa or federal law would force the parties to
change their litigation strategies and would require both parties to expend additional
resources and incur additional expenses. While plaintiff was exploring whether to pursue
an altered course in this case, the parties discussed and reached a resolution that would
prevent the parties from undertaking the task of changing their litigation strategies. (See
id.). That resolution is the proposed settlement that is now before the Court. In light of
the posture of this case, the Court concludes that dismissal of this case is supported by
the circumstances leading to the decision of the parties.
Under the second Schultzen factor, the Court examines any settlement of class
interests or concessions of class interests that were made by a class representative or
counsel. 217 F.R.D. at 471. The parties assert that the settlement does not compromise
class members’ claims or make concessions on their behalf. (Doc. 83-1, at 3-4). The
Court has read through the settlement agreement and agrees with the parties that class
members’ future claims are not compromised. The Court disagrees, however, that any
class members would be “unaffected by the settlement.” (Id., at 4). If the Court grants

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the parties’ motion, class members will lose the potential benefit of their claims being
litigated through this existing case. That result would affect any class members who may
wish to rely on this case as a vehicle for bringing their claims.
Schultzen, however, does not address the potential effects on class members.
Rather, Schultzen considers whether a settlement would compromise class members’
interests. See Schultzen, 217 F.R.D. at 472. Although class members’ interests would
be affected by dismissal of this case, the Court is not aware of any such class members.
Indeed, no potential class members appeared at the hearing to oppose approval of the
settlement, nor did any potential class members respond to plaintiff’s notice of this case.
(See Doc. 83-1, at 4). The Court, thus, finds that even though the potential exists for
class members’ interests to be compromised by dismissal of this case, the absence of any
responses to the notice of this case significantly mitigates any harm that could result.
This factor, consequently, weighs in favor of dismissal.
Third, the Court considers class members’ reliance on the filing of this action.
Schultzen, 217 F.R.D. at 471. Based on the lack of responses to plaintiff’s notice of this
case, the Court concludes that it is unlikely that any class members are relying on the
current suit. Although the parties do not address whether class members may have
otherwise received notice of this suit, the Court finds that this possibility is unlikely.
There is no indication that this case has been the subject of a great deal of publicity, nor
is there any indication that individuals other than the named plaintiff became aware of
this suit at all. Thus, this factor also weighs in favor of dismissal.
Fourth, the Court considers the “amount of time for class members to file other
actions in view of applicable statute(s) of limitation.” Id. Although this Court has found
that Iowa law applies, a different court sitting in a different forum could find that a
different body of law, such as California law, governs. Nesladek v. Ford Motor Co., 46
F.3d 734, 736 (8th Cir. 1995) (“Federal courts sitting in diversity apply the forum state’s

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conflict of laws rules.” (citing Klaxon Co. v. Stentor Elec. Mfg. Co., 313 U.S. 487, 496
(1941))). If a different court were to find that a different body of law applies to the
claims alleged here, the statute of limitations under that different body of law could be
different than the statutes of limitation that exist under Iowa law. That this possibility
exists makes it difficult for the Court to determine the applicable statute of limitations
period and the time remaining in that period. Based on the lack of responses to plaintiff’s
notice of suit, however, the Court finds that this possibility is unlikely to arise in the
future and does not lead the Court to find that dismissal is inappropriate.
Finally, under the fifth factor, the Court considers any other factors bearing on
possible prejudice or loss of benefit to absent class members. Schultzen, 217 F.R.D. at
471. As articulated above, the Court finds it unlikely that any potential class member is
relying on this case, and the parties have not made any concessions as to class members.
This suggests that the risk of prejudice to class members is minimal. The final factor
thus weighs in favor of dismissal.
In assessing the factors set forth in Marshall and those set forth in Schultzen, the
Court finds that the settlement is fair, reasonable and adequate and that it is proper to
dismiss the class claims. The class was never certified, and notice of the settlement is
not required to be sent to class members or potential class members under Rule 23(e).
Id. at 473 (collecting cases that stand for the proposition that “notice to putative class
members of a pre-certification dismissal is not mandated by Rule 23(e)”). The Court
approves the proposed settlement agreement as to the class claims. The class claims are
dismissed without prejudice under Federal Rule 23(e).
B.

Individual Claims

The parties jointly request that the Court “dismiss[ ] [p]laintiff’s individual claims
with prejudice according to the terms of the [s]ettlement [a]greement.” (Doc. 83-1, at
10). The settlement agreement includes a provision stating that “[a]ll claims and causes

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of action asserted in [p]laintiff’s [c]omplaint for himself individually” are released and
discharged. (Doc. 83-2, at 5). To the extent plaintiff asserts the class claims in his
individual capacity, in addition to on the putative class’s behalf, the Court finds it
appropriate to dismiss the individual claims with prejudice under Federal Rule of Civil
Procedure 41(a)(2). In reaching this conclusion, the Court notes that the parties jointly
moved for dismissal with prejudice and that the request was made in a fully briefed
motion that accompanied a comprehensive settlement agreement.
The parties further request an order “approving the terms of the [s]ettlement
[a]greement as fair and reasonable.” (Doc. 83-1, at 10). The Court, however, need not
approve of the terms of the settlement agreement as to the individual claims to properly
dismiss the individual claims. (Doc. 83-1, at 10). The Court, thus, offers no opinion on
the fairness or reasonableness of the settlement agreement as to plaintiff’s individual
claims.
Finally, the parties request that the Court approve settlement of plaintiff’s FLSA
claims, and the parties assert that private settlement of the FLSA claims would be proper
in this case. (Doc. 83-1, at 7-10). Plaintiff has not, however, asserted an FLSA claim
in his complaint. 2 Because no FLSA claims have been pled, the Court cannot come to
specific conclusions regarding any private FLSA claims that may exist. This renders the
Court incapable of determining whether the settlement was “reached as a result of
contested litigation to resolve a bona fide dispute between the parties.”

Roeder v.

DirecTV, Inc., No. C14-4091-LTS, 2017 WL 3499942, at *1 (N.D. Iowa July 19, 2017)
(citation omitted).

2

Because plaintiff has not asserted an FLSA claim at all, plaintiff also has not asserted an FLSA
claim on behalf of the class. The Court, thus, need not address whether class settlement of any
FLSA claims would be proper.

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Moreover, even if the Court did have specific facts regarding the FLSA claims
that are purportedly subject to the settlement agreement, the Court is doubtful that the
parties would be able to show that the settlement was reached as a result of contested
litigation. Put simply, the parties did not litigate this case with respect to the FLSA, and
there is no indication in the pleadings that the parties understood plaintiff’s arguments to
be applicable to the FLSA. To the extent the parties’ motion seeks dismissal of plaintiff’s
theoretical FLSA claims, the parties’ motion is denied.
III.

CONCLUSION

For the reasons stated above, the Court grants the parties’ motion to dismiss the
plaintiff’s individual claims with prejudice, to dismiss the class claims without prejudice,
and the Court approves the settlement as to the class claims. The parties’ motion for an
order approving the terms of the settlement of plaintiff’s theoretical FLSA claims is
denied.
IT IS SO ORDERED this 31st day of May, 2019.
__________________________________
C.J. Williams
United States District Judge
Northern District of Iowa

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