Allen v. Bedolla

• Decision Date: 02 June 2015
• Docket Number: Nos. 13–55106,13–56685.,s. 13–55106
• Citation: 787 F.3d 1218
• Parties: Jeffrey Lee ALLEN, on behalf of himself, all others similarly situated, the general public and as an “aggrieved employee” under the California Labor Code Private Attorneys General Act, Plaintiff–Appellee, and Labor Ready Southwest, Inc., a Washington corporation doing business in the State of California, Defendant–Appellee, v. Margie BEDOLLA; Anthony A. Allen ; Michael Alvarez; Tyler Farmer, Movants–Appellants. Jeffrey Lee Allen, on behalf of himself, all others similarly situated, the general public and as an “aggrieved employee” under the California Labor Code Private Attorneys General Act, Plaintiff–Appellee, and Labor Ready Southwest, Inc., a Washington corporation doing business in the State of California, Defendant–Appellee, v. Margie Bedolla; Anthony A. Allen ; Michael Alvarez; Tyler Farmer, Objectors–Appellants.
• Court: U.S. Court of Appeals — Ninth Circuit

787 F.3d 1218

Jeffrey Lee ALLEN, on behalf of himself, all others similarly situated, the general public and as an “aggrieved employee” under the California Labor Code Private Attorneys General Act, Plaintiff–Appellee
and
Labor Ready Southwest, Inc., a Washington corporation doing business in the State of California, Defendant–Appellee
v.
Margie BEDOLLA;

Anthony A. Allen ;

Michael Alvarez;

Tyler Farmer, Movants–Appellants.

Jeffrey Lee Allen, on behalf of himself, all others similarly situated, the general public and as an “aggrieved employee” under the California Labor Code Private Attorneys General Act, Plaintiff–Appellee
and
Labor Ready Southwest, Inc., a Washington corporation doing business in the State of California, Defendant–Appellee
v.
Margie Bedolla;

Anthony A. Allen ;

Michael Alvarez;

Tyler Farmer, Objectors–Appellants.

Nos. 13–55106
13–56685.

United States Court of Appeals, Ninth Circuit.

Argued and Submitted Feb. 4, 2015.
Filed June 2, 2015.

787 F.3d 1219

Melissa Grant and Glenn A. Danas (argued), Liana Carter, Capstone Law APC, Los Angeles, CA, for Objectors–Appellants.

Mark R. Thierman and Joshua D. Buck, Thierman Law Firm, P.C., Reno, NV; Joseph Cho and Ronald H. Bae, Aequitas Law Group, APLC, Los Angeles CA; Chaim Shaun Setareh (argued), Law Office of Shaun Setareh, APC, Beverly Hills, CA, for Plaintiff–Appellee.

David R. Ongaro (argued), Thompson & Knight LLP, San Francisco, CA, for Defendant–Appellee.

Appeal from the United States District Court for the Central District of California, Dean D. Pregerson, District Judge, Presiding. D.C. No. 2:09–cv–04266–DDP–AGR.

Before: STEPHEN REINHARDT and RONALD M. GOULD, Circuit Judges, and J. FREDERICK MOTZ, Senior

787 F.3d 1220

District Judge.^*

OPINION

GOULD, Circuit Judge:

We review the district court's approval of a class action settlement, between day laborers and Labor Ready Southwest, that was negotiated in the absence of a certified class. Appellants, objectors to the settlement, appeal the district court's final approval of the settlement, as well as the district court's denial of their motion to intervene. They raise contentions about whether the approved settlement is fair, reasonable and adequate. We have jurisdiction under 28 U.S.C. § 1291. We affirm the denial of the motion to intervene. Our high procedural standard for review of class action settlements negotiated without a certified class leads us to vacate the order granting final approval to the settlement and the award of attorneys' fees, and to remand to the district court for further proceedings.

I

Labor Ready Southwest (“Labor Ready”) is a temporary staffing agency, providing day laborers to businesses in need of labor help. The employees work for the businesses that require labor, but they remain employees of Labor Ready, which pays the employees, though not for time spent waiting for assignments at Labor Ready's local offices, and not for time spent traveling from the local office to the businesses that need labor. Labor Ready also allowed employees to receive a paycheck or alternatively to use a cash disbursement machine (“CDM”) in its facility. The fee for using the CDM was one dollar plus any change from the paycheck amount less than a full dollar.

The Underlying Litigation

Plaintiff–Appellee Jeffrey Lee Allen (“Allen”)¹ filed this putative class action in California state court in April 2009. Allen claimed violations of the Fair Labor Standards Act of 1938 (“FLSA”), 29 U.S.C. § 201 et seq., as well as California wage and hour and unfair competition laws alleging that, inter alia, Labor Ready had illegally failed to pay employees for their wait and travel times, and had taken unlawful paycheck deductions by providing CDMs and charging for their use.

Margie Bedolla, Anthony A. Allen, Michael Alvarez and Tyler Farmer (collectively “Objectors–Appellants” or “Objectors”), are the plaintiffs in other uncertified class actions against Labor Ready pending in California state courts. The first of these was filed in September 2010, and the other three were filed in November 2011. The Objectors' suits raise similar wage and hour claims, and also meal and rest break claims that were not raised by Allen.

Labor Ready removed Allen's suit to the Central District of California. Class certification was denied in that case. In March 2011, the district court granted summary judgment to Labor Ready on all claims except for Allen's claims regarding Labor Ready's use of CDMs and related state law claims, which were remanded to state court after the district court declined to exercise its supplemental jurisdiction. Allen appealed that ruling to the Ninth Circuit.²

787 F.3d 1221

The Settlement Agreement

The parties previously attempted two unsuccessful mediations, but while Allen's state and federal appeals were pending, the parties entered mediation a third time and were successful, leading to a proposed settlement in October 2012. The parties then jointly moved to remand the case to the district court for settlement, and we remanded.

Three key provisions of the settlement are at issue here. (1) There was a gross settlement fund of $4.5 million. From that fund, Labor Ready agreed to pay each class member who submits a claims form within 45 days of the class notice $10 for non-CDM claims and $25 for class members who used the CDMs during the class period. There is no minimum payout and all of the money in the settlement fund not paid toward attorneys' fees, administration costs, or to class members who submit claims reverts to Labor Ready. (2) There was injunctive relief, whereby Labor Ready will shut down the CDMs throughout California and replace them with an electronic paycard through which workers receive their pay daily without charge; further, Labor Ready will provide training to staff regarding compliance with meal and rest break and overtime laws and committed to an audit to ensure compliance with those laws, and Labor Ready will post notices in its branch offices telling workers they need not wait in the office for work and provide business cards informing them of their rights under state labor laws. (3) There was an agreement on attorneys' fees for Allen's counsel (the class counsel), under which Labor Ready would not contest an award of 25% of the $4.5 million common fund (i.e., $1.125 million).

The settlement releases or forecloses all of the claims that Allen asserted, or could have asserted, against Labor Ready, including meal and rest break claims that he did not make, except that class members who do not make a claim will not release any claims under FLSA, and class members who opt out will not be held to release any claims made in the lawsuit for individual relief.

After preliminary approval was granted in April 2013, notice was mailed to 210,224 potential class members. Under the terms of the class notice and the district court's preliminary approval order, all objections, opt outs, and claims were required to be mailed by July 15, 45 days after the class notice was sent. In response, 14,947 people submitted timely and valid claim forms. Thus, the Labor Ready's maximum possible payout to the class is $373,675, assuming that every person who submitted a claim used the CDMs and is entitled to the higher relief amount of $25.

Upon learning details of the prospective settlement through communications with Labor Ready in their separate suits, Objectors sought to intervene as of right and to intervene permissively in Allen's case. The district court denied their motion, but granted Objectors leave to object at the preliminary approval stage.

After a final fairness hearing, the district court issued an order approving the settlement on August 27, 2013. The district court determined that the notice procedure satisfied federal law and due process. The order noted that the four Objectors had raised concerns, but overruled

787 F.3d 1222

them. The district court found that the settlement terms were fair, reasonable and adequate to the class, and awarded $1.125 million in attorney's fees, finding that figure (25% of the common fund) fair and reasonable.

Objectors' appeals of the denial of their intervention motion and of final settlement approval timely followed.

II

The settlement of a class action must be fair, adequate, and reasonable. Fed.R.Civ.P. 23(e)(2). We review a district court's approval of a class-action settlement for a clear abuse of discretion. See Rodriguez v. West Publishing Corp., 563 F.3d 948, 963 (9th Cir.2009). “A court abuses its discretion when it fails to apply the correct legal standard or bases its decision on unreasonable findings of fact.” Nachshin v. AOL, LLC, 663 F.3d 1034, 1038 (9th Cir.2011).

Denial of a motion to intervene as of right is reviewed de novo, except for the timeliness prong which is reviewed for an abuse of discretion. Chamness v. Bowen, 722 F.3d 1110, 1121 (9th Cir.2013). Denial of a motion for permissive intervention is reviewed for an abuse of...