Six (6) Mexican Workers v. Arizona Citrus Growers

• Decision Date: 18 May 1990
• Docket Number: Nos. 89-15269,89-15622,s. 89-15269
• Citation: 904 F.2d 1301
• Parties: , 116 Lab.Cas. P 35,375 SIX (6) MEXICAN WORKERS, et al., Plaintiffs-Appellees, v. ARIZONA CITRUS GROWERS; Bodine Produce Company, Inc.; Robert Fletcher, d/b/a Fletcher Farms, Defendants-Appellants.
• Court: U.S. Court of Appeals — Ninth Circuit

Page 1301

904 F.2d 1301

107 A.L.R.Fed. 779, 116 Lab.Cas. P 35,375

SIX (6) MEXICAN WORKERS, et al., Plaintiffs-Appellees, v. ARIZONA CITRUS GROWERS; Bodine Produce Company, Inc.;

Robert Fletcher, d/b/a Fletcher Farms,

Defendants-Appellants.

Nos. 89-15269, 89-15622.

United States Court of Appeals, Ninth Circuit.

Argued and Submitted March 15, 1990.

Decided May 18, 1990.

Thomas N. Crowe, Crowe & Scott, Phoenix, Ariz., for defendants-appellants.

Garry B. Bryant, Tucson, Ariz., for plaintiffs-appellees.

Appeal from the United States District Court for the District of Arizona.

Before SNEED, FARRIS and FERNANDEZ, Circuit Judges.

FARRIS, Circuit Judge:

This is an appeal from the district court's judgment finding Arizona Citrus Growers and two of its member growers liable for $1,846,500 in statutory damages for violation of the Farm Labor Contractor Registration Act. A prior appeal on several interlocutory rulings was consolidated with this appeal of the final judgment.

FACTS

ACG is a nonprofit corporation operated as a cooperative for marketing the fruit produced by its 52 members. Appellants Bodine Produce Company and Fletcher Farms were the two largest members, controlling 60% of the total acreage harvested by ACG. A class action suit was filed on April 21, 1977 against these parties for failure to comply with requirements of FLCRA. The class consists of 1349 undocumented Mexican workers who were employed by ACG during the 1976-77 picking season. After a bench trial in 1984, the district court issued a finding that ACG was liable for the following violations of the Act: ¹

1. Failure to register under the Act, 7 U.S.C. Sec. 2043(a) ($0 award)

2. Failure to make written disclosure of terms of employment, 7 U.S.C. Secs. 2045(b), (c) ($150 award per plaintiff)

3. Transportation violations, 7 U.S.C. Secs. 2044(a)(4), (b)(12) ($250 award per plaintiff)

4. Record keeping violations, 7 U.S.C. Sec. 2045(e) ($250 award per plaintiff)

5. Housing violations, 7 U.S.C. Secs. 2044(a)(4), (b)(12) ($500 award per plaintiff)

Defendants Bodine and Fletcher were found liable as follows:

1. Engaging unregistered farm labor contractor, 7 U.S.C. Sec. 2043(c) ($100 award per plaintiff)

2. Failure to obtain records, 7 U.S.C. Sec. 2050c ($125 award per plaintiff)

After the trial, the district court issued orders concerning the identification of eligible class members. On March 31, 1989, the court issued a judgment for statutory damages against the defendants in the amount of $1,846,500 based on the identified class members. The court specified the method for distributing and verifying claims of members who could be located and ordered that any unclaimed funds be distributed through a cy pres award to the Inter-American Fund for indirect distribution in Mexico. See Six (6) Mexican Workers v. Arizona Citrus Growers, 641 F.Supp. 259 (D.Ariz.1986). The court also awarded attorneys fees in the amount of 25 percent of the damages, recoverable from the plaintiff's award under the common fund doctrine.

ACG argues that the number of unlocated class members makes the class unmanageable, and that the cy pres doctrine may not be used to rectify this problem. ACG also appeals the magnitude of the district court's award as an abuse of discretion. Finally, ACG claims that the district court's award of attorney's fees was an abuse of discretion.

STANDARD OF REVIEW

We review for an abuse of discretion a district court's certification of a class action, Fentron Industries v. National Shopmen Pension Fund, 674 F.2d 1300, 1305 (9th Cir.1982), the award of statutory damages, see Alvarez v. Longboy, 697 F.2d 1333, 1339-40 (9th Cir.1983), and the award of attorneys' fees. Quesada v. Thomason, 850 F.2d 537, 538 (9th Cir.1988).

DISCUSSION

I. CLASS MANAGEABILITY AND FLUID RECOVERY

ACG argues that the inability to locate most of the plaintiffs makes this case unmanageable as a class action. The difficulty surrounds the distribution of damages for the class members not located. ACG further contends that a "cy pres" or "fluid recovery" system may not be used to resolve the problem of distributing unclaimed funds.

A. Class Manageability

Among other requirements, a class action filed under Fed.R.Civ.P. 23(b)(3) must be "superior to other available methods" of adjudication in light of any "difficulties likely to be encountered in the management of a class action." Fed.R.Civ.P. 23(b)(3). This "manageability" requirement includes consideration of the potential difficulties in notifying class members of the suit, calculation of individual damages, and distribution of damages. 3B Moore's Federal Practice, Sec. 23.45[4.-4] (1987). ACG does not argue that notification was inadequate, ² but contends that the When a class action involves a large number of class members but only a small individual recovery, the cost of separately proving and distributing each class member's damages may so outweigh the potential recovery that the class action becomes unfeasible. Fluid recovery or "cy pres" distribution avoids these difficulties by permitting aggregate calculation of damages, the use of summary claim procedures, and distribution of unclaimed funds to indirectly benefit the entire class. See Developments in the Law--Class Actions, 89 Harv.L.Rev. 1318, 1517 (1976). Federal courts have frequently approved this remedy in the settlement of class actions where the proof of individual claims would be burdensome or distribution of damages costly. In re Agent Orange Product Liability Litigation, 818 F.2d 179, 184-85 (2d Cir.1987); 2 Newberg on Class Actions, Sec. 11.20 (2d Ed.1985). Cf. Bebchick v. Public Utilities Commission, 318 F.2d 187 (D.C.Cir.) (fluid recovery ordered in non-class action), cert. denied, 373 U.S. 913, 83 S.Ct. 1304, 10 L.Ed.2d 414 (1963). Moreover, numerous state courts have utilized cy pres or fluid recovery procedures to ensure that wrongdoers do not "retain ill gotten gains" simply because of the administrative difficulties traditionally associated with small per individual damages. E.g., State v. Levi Strauss & Co., 41 Cal.3d 460, 224 Cal.Rptr. 605, 612, 715 P.2d 564, 571 (1986) (en banc); see Newberg on Class Actions at Sec. 10.25.

district court improperly used "fluid recovery" to avoid the "unmanageable" difficulties associated with individual proof and distribution of damages.

Nevertheless, several federal courts have rejected fluid recovery as a "solution of the manageability problems of class actions." Eisen v. Carlisle & Jacquelin, 479 F.2d 1005, 1018 (2d Cir.1973), vacated on other grounds, 417 U.S. 156, 94 S.Ct. 2140, 40 L.Ed.2d 732 (1974); In re Hotel Telephone Charges, 500 F.2d 86, 89-90 (9th Cir.1974); Windham v. American Brands, Inc., 565 F.2d 59, 72 (4th Cir.1977), cert. denied, 435 U.S. 968, 98 S.Ct. 1605, 56 L.Ed.2d 58 (1978). But see Simer v. Rios, 661 F.2d 655 (7th Cir.1981) (rejecting Eisen and accepting fluid recovery on ad hoc basis).

In Eisen, suit was brought on behalf of approximately six million traders in odd lot stock alleging antitrust and securities violations. The court rejected the plaintiff's attempt to use fluid recovery where it avoided constitutionally required notice to each class member, dispensed with individual calculation of damages, and distributed the damages to future traders who were not necessarily members of the class. See 479 F.2d at 1017-18.

In In re Hotel we relied on Eisen in rejecting a fluid recovery argument. In re Hotel involved a class action under the Sherman Antitrust Act brought by a class consisting of several million individuals. The plaintiffs sought to use fluid recovery to avoid the difficulty of proving each class members' specific injury. Relying on Eisen, we rejected the attempt and stated that "allowing gross damages by treating unsubstantiated claims of class members collectively significantly alters substantive rights under the antitrust statutes." 500 F.2d at 90. We held that neither Rule 23 nor the antitrust laws permitted dispensing with individual proof of damages. Id. at 90, 92. Cf. Windham v. American Brands, Inc., 565 F.2d at 72 ("Nor ... can the difficulties inherent in proving individual damages be avoided by the use of a form of 'fluid recovery.' ").

1) Aggregate Proof of Damages

The rejection of fluid recovery as it permits the aggregation of damages has caused some confusion and has received considerable criticism. See Simer v. Rios, 661 F.2d 655, 676 (7th Cir.1981) (adopting use of fluid recovery on ad hoc basis); In re Federal Skywalk Cases, 680 F.2d 1175, 1190 (8th Cir.1982) (Heaney, J., dissenting) (permissibility of aggregation depends on policy of underlying cause of action); 2 Newberg on Class Actions at Sec. 10.05. We need not address this controversy, however, because this case does not raise the concerns addressed by our decision in In re Hotel, or the decisions in Eisen and Windham. The district court did not use fluid recovery to avoid individual proof of damages, but adopted a cy pres procedure only The plaintiff class sought statutory not actual damages. Statutory damages under FLCRA, unlike damages under the antitrust laws addressed in In re Hotel, are not dependent on proof of actual injury. Alvarez v. Longboy, 697 F.2d 1333, 1338 (9th Cir.1982). Congress intended these damages to promote enforcement of FLCRA and deter future violations. See S.Rep. No. 1295, 93d Cong., 2d Sess., reprinted in 1974 U.S.Code Cong. & Ad. News 6441. Therefore, the district court was not obligated to require individual proof of injury from each class member. Montelongo v. Meese, 803 F.2d at 1351 (FLCRA damages obviated need for individual proof); see Haywood v. Barnes, 109 F.R.D. 568, 583-84 (E.D.N.C.1986) (holding that an "across the board" class award of liquidated damages under FLCRA's successor provision was not an attempt to use "fluid recovery"). The concerns in Eisen and In re Hotel about the impermissible circumvention of individual proof requirements...