Litigating California Wage & Hour and Labor Code Class Actions
Litigating California Wage & Hour and Labor Code Class Actions Litigating California Wage & Hour and Labor Code Class Actions
plaintiffs prevailed and some explanation why the presumably lesser settlement amount represented a fair recovery for the class: While an agreement reached under these circumstances presumably will be fair to all concerned, particularly when few of the affected class members express objections, in the final analysis it is the court that bears the responsibility to ensure that the recovery represents a reasonable compromise, given the magnitude and apparent merit of the claims being released, discounted by the risks and expenses of attempting to establish and collect on those claims by pursuing the litigation. 486 Furthermore, the court ordered that the objector was entitled to some limited discovery to evaluate the case and to support an objection that the settlement amount was too low to be approved. Although the trial court is not to decide the merits of the case or easily overturn a negotiated settlement, the trial court “must at least satisfy itself that the class settlement is within the ‘ballpark’ of reasonableness.” 487 For practical purposes, the main effect of this ruling has simply been to require the plaintiffs’ lawyer, in the motion for approval of a settlement, to spell out some theoretical maximum exposure and explain in general terms why a discounted amount was proper. But the ruling also creates the potential that a court could reject a settlement solely because it was reduced too much from a theoretical “maximum” exposure value. The Kullar decision overlooks that forecasting a maximum exposure is problematic, especially where there is a lack of documentary evidence to prove the extent of possible damages. For example, in an exempt misclassification case, there may be no agreed way to assess what percentage of the class was misclassified or the average amount of overtime worked. In the absence of a comprehensive survey of the class (which can cost tens or hundreds of thousands of dollars to accomplish and even then may be of questionable validity), plaintiffs’ counsel will be working with cherry-picked data to estimate the average overtime worked by the class. Similarly, in a case where the employer argues great variation among the class, there may be a dispute as to what percentage of the class is properly classified. Accordingly, a theoretical maximum exposure number built on 100% misclassification of the class and 10-15 hours of overtime may bear no relation whatsoever to the fair “settlement value” of a case. As long as this exercise of analyzing the proper value of a settlement is truly limited to some kind of “rational basis” review, judicial scrutiny of the settlement value should not 486 487 Id. at 129. Id. at 133. Seyfarth Shaw LLP | www.seyfarth.com Litigating California Wage & Hour Class Actions (12th Edition) 108
have any great impact on class settlement. If the trend toward greater judicial scrutiny of settlements continues unreasonably, however, it could discourage class settlements because employers will lack confidence that the settlements they negotiate will ultimately be approved. D. Class Notice Courts have also exercised greater scrutiny of the notice that is sent to the class. The law requires that the class receive notice using the best “practicable” method. 488 Courts have been increasingly concerned that recipients of the class notice understand the nature of the claim, can calculate the value of their share of the settlement, and can readily access court documents to investigate the nature of the case. The judges in the Alameda Complex Division have requiried that the parties make exhaustive efforts to notify class members of the claims and have sufficient information to exercise their options under the settlement. For example, in addition to requiring that the administrator send a reminder postcard to class members who have not made claims, the judges in Alameda have ordered that the administrator make at least three telephone calls to class members. E. Objection to Settlements When a class settlement is slated for final approval, often the last hurdle the settling parties must surmount any objection to the settlement. Any member of the settlement class who does not opt out of the settlement may assert an objection to the settlement. 489 Courts tend to be extremely reluctant to sustain objections where the sole basis is that the objector believes the settlement is not generous enough. After all, if an individual believes his wage and hour claim is worth more than the class is receiving, then he can opt out of the settlement and assert his own claim (and typically can recover attorney’s fees if he prevails). In 7-Eleven Owners for Fair Franchising v. Southland Corp., 490 the court explained that in evaluating an objection that a settlement was too low given the merits of the case, a court must not substitute its own opinion on the merits for those of the settling parties: “the merits of the underlying class claims are not a basis for upsetting the settlement of a class action; the operative word is ‘settlement.’ Instead the 488 489 490 Hypertouch, Inc. v. Superior Court, 128 Cal. App. 4th 1527, 1539 (2005) (notice “must be the best practicable, reasonably calculated, under all the circumstances, to apprise interested parties of the pendency of the action and afford them an opportunity to present their objections”). Wershba v. Apple Computer, Inc., 91 Cal. App. 4th 224, 235 (2001). 85 Cal. App. 4th 1135 (2000). Seyfarth Shaw LLP | www.seyfarth.com Litigating California Wage & Hour Class Actions (12th Edition) 109
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have any great impact on class settlement. If the trend toward greater judicial scrutiny of<br />
settlements continues unreasonably, however, it could discourage class settlements<br />
because employers will lack confidence that the settlements they negotiate will ultimately<br />
be approved.<br />
D. <strong>Class</strong> Notice<br />
Courts have also exercised greater scrutiny of the notice that is sent to the class. The law<br />
requires that the class receive notice using the best “practicable” method. 488 Courts have<br />
been increasingly concerned that recipients of the class notice underst<strong>and</strong> the nature of the<br />
claim, can calculate the value of their share of the settlement, <strong>and</strong> can readily access court<br />
documents to investigate the nature of the case.<br />
The judges in the Alameda Complex Division have requiried that the parties make<br />
exhaustive efforts to notify class members of the claims <strong>and</strong> have sufficient information to<br />
exercise their options under the settlement. For example, in addition to requiring that the<br />
administrator send a reminder postcard to class members who have not made claims, the<br />
judges in Alameda have ordered that the administrator make at least three telephone calls<br />
to class members.<br />
E. Objection to Settlements<br />
When a class settlement is slated for final approval, often the last hurdle the settling parties<br />
must surmount any objection to the settlement. Any member of the settlement class who<br />
does not opt out of the settlement may assert an objection to the settlement. 489 Courts tend<br />
to be extremely reluctant to sustain objections where the sole basis is that the objector<br />
believes the settlement is not generous enough. After all, if an individual believes his wage<br />
<strong>and</strong> hour claim is worth more than the class is receiving, then he can opt out of the<br />
settlement <strong>and</strong> assert his own claim (<strong>and</strong> typically can recover attorney’s fees if he<br />
prevails).<br />
In 7-Eleven Owners for Fair Franchising v. Southl<strong>and</strong> Corp., 490 the court explained that in<br />
evaluating an objection that a settlement was too low given the merits of the case, a court<br />
must not substitute its own opinion on the merits for those of the settling parties:<br />
“the merits of the underlying class claims are not a basis for upsetting the<br />
settlement of a class action; the operative word is ‘settlement.’ Instead the<br />
488<br />
489<br />
490<br />
Hypertouch, Inc. v. Superior Court, 128 Cal. App. 4th 1527, 1539 (2005) (notice “must be the best practicable,<br />
reasonably calculated, under all the circumstances, to apprise interested parties of the pendency of the action <strong>and</strong><br />
afford them an opportunity to present their objections”).<br />
Wershba v. Apple Computer, Inc., 91 Cal. App. 4th 224, 235 (2001).<br />
85 Cal. App. 4th 1135 (2000).<br />
Seyfarth Shaw LLP | www.seyfarth.com <strong>Litigating</strong> <strong>California</strong> <strong>Wage</strong> & <strong>Hour</strong> <strong>Class</strong> <strong>Actions</strong> (12th Edition) 109
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