Gonzalez v. Corecivic of Tenn., LLC

JOSE GONZALEZ, Plaintiff, v. CORECIVIC OF TENNESSEE, LLC and CORECIVIC, INC., Defendants.

No. 1:16-cv-01891-DAD-JLT

UNITED STATES DISTRICT COURT FOR THE EASTERN DISTRICT OF CALIFORNIA

September 12, 2018

ORDER DENYING PRELIMINARY APPROVAL OF CLASS ACTION SETTLEMENT

(Doc. Nos. 30, 40)

This matter comes before the court on plaintiff's unopposed motion for preliminary approval of a class action settlement. Plaintiff filed the motion on April 13, 2018. (Doc. No. 30.) A hearing was held on the matter on May 15, 2018, with attorneys Peter Dion-Kindem and Lonnie Blanchard appearing on behalf of plaintiff and the putative class, and attorney Paul Gleason appearing on behalf of defendants. (Doc. No. 33.) Following the hearing, the court issued a minute order on May 16, 2018 directing the parties to filed supplemental briefing within 30 days addressing several specified topics. (Doc. No. 34.) Plaintiff timely filed this supplemental brief on June 15, 2018. (Doc. No. 40.) For the reasons discussed below, the court denies preliminary approval of this class action settlement.

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BACKGROUND

This case concerns various wage-and-hour claims brought on behalf of prison guards and other workers at several of defendants' private prison facilities. Plaintiff moves for this court's approval of a global settlement resolving claims brought in both this lawsuit and another action pending before this court, Richards v. CoreCivic of Tennessee, LLC, No. 1:17-cv-01094-LJO-JLT.

Plaintiff alleges he was a corrections officer at defendants' privately-operated California City Correctional Center from April 2011 to November 23, 2013, at which point he was laid off when the operations of the facility were transferred to the State of California. (Doc. No. 1 at 18-19.) Plaintiff alleges class members were required to pass through three different security gates and undergo significant screening, as well as check in with shift supervisors, all prior to being permitted to clock in at work. (Doc. No. 1 at 22-23.) Similarly, when leaving at the end of their shift, class members were required to clock out prior to going back through the three security gates. (Id. at 23.) According to plaintiff., this process took approximately 10 to 15 minutes before a shift, and 10 minutes after each shift. (Id.) Because of this, the defendants allegedly failed to appropriately pay class members both the minimum wage and overtime. (Id. at 23-24.)

Additionally, the complaint alleges that plaintiff and other class members were not permitted to leave their posts for meal or rest breaks, except to quickly go to the bathroom. (Id. at 25-26.) Because class members regularly worked more than 10 hours in a shift, they were frequently entitled to at least two meal breaks on numerous shifts, which were not provided to them. (Id. at 26.) Similarly, class members were not permitted to take rest breaks, though frequently they worked shifts of more than 10 hours, which would typically afford them three rest breaks. (Id. at 27.) Plaintiff also seeks accompanying waiting time penalties and damages for unfair business practices. (Id. at 27-29.)

LEGAL STANDARD

1. Rule 23 Settlements

Rule 23 mandates that, "[t]he claims, issues, or defenses of a certified class may be settled, voluntarily dismissed, or compromised only with the court's approval." Fed. R. Civ. P.23(e). The following procedures apply to the court's review of the proposed settlement:

The court must direct notice in a reasonable manner to all class members who would be bound by the proposal.

If the proposal would bind class members, the court may approve it only after a hearing and on finding that it is fair, reasonable, and adequate.

The parties seeking approval must file a statement identifying any agreement made in connection with the proposal.

. . .

Any class member may object to the proposal if it requires court approval under this subdivision (e); the objection may be withdrawn only with the court's approval.

Id.

"Courts have long recognized that settlement class actions present unique due process concerns for absent class members." In re Bluetooth Headset Prods. Liab. Litig., 654 F.3d 935, 946 (9th Cir. 2011) (citation and internal quotations omitted). To protect the rights of absent class members, Rule 23(e) requires that the court approve all class action settlements "only after a hearing and on finding that it is fair, reasonable, and adequate." Fed. R. Civ. P. 23(e)(2); Bluetooth, 654 F.3d at 946. However, when parties seek approval of a settlement agreement negotiated prior to formal class certification, "there is an even greater potential for a breach of fiduciary duty owed the class during settlement." Bluetooth, 654 F.3d at 946. Thus, the court must review such agreements with "a more probing inquiry" for evidence of collusion or other conflicts of interest than what is normally required under the Federal Rules. Hanlon v. Chrysler Corp., 150 F.3d 1011, 1026 (9th Cir. 1998); see also Lane v. Facebook, Inc., 696 F.3d 811, 819 (9th Cir. 2012).

Review of a proposed class action settlement ordinarily proceeds in three stages. See MANUAL FOR COMPLEX LITIGATION (4th) § 21.632. First, the court conducts a preliminary fairness evaluation and, if applicable, considers class certification. Second, if the court makes a preliminary determination on the fairness, reasonableness, and adequacy of the settlement terms, the parties are directed to prepare the notice of certification and proposed settlement to the class members. Id. (noting that if the parties move for both class certification and preliminaryapproval, the certification hearing and preliminary fairness evaluation can usually be combined). Third, the court holds a final fairness hearing to determine whether to approve the settlement. Id.; see also Narouz v. Charter Commc'ns, LLC, 591 F.3d 1261, 1266-67 (9th Cir. 2010). Though Rule 23 does not explicitly provide for such a procedure, federal courts generally find preliminary approval of settlement and notice to the proposed class appropriate if the proposed settlement "appears to be the product of serious, informed, non-collusive negotiations, has no obvious deficiencies, does not improperly grant preferential treatment to class representatives or segments of the class, and falls within the range of possible approval." Lounibos v. Keypoint Gov't Sols. Inc., No. 12-cv-00636-JST, 2014 WL 558675, at *5 (N.D. Cal. Feb. 10, 2014) (quoting In re Tableware Antitrust Litig., 484 F. Supp. 2d 1078, 1079 (N.D. Cal. 2007)); see also NEWBERG ON CLASS ACTIONS § 13:13 (5th ed. 2011); Dearaujo v. Regis Corp., Nos. 2:14-cv-01408-KJM-AC, 2:14-cv-01411-KJM-AC, 2016 WL 3549473 (E.D. Cal. June 30, 2016) ("Rule 23 provides no guidance, and actually foresees no procedure, but federal courts have generally adopted [the process of preliminarily certifying a settlement class]."). While it is not a court's province to "reach any ultimate conclusions on the contested issues of fact and law which underlie the merits of the dispute," a court should weigh, among other factors, the strength of a plaintiff's case; the risk, expense, complexity, and likely duration of further litigation; the extent of discovery completed; and the value of the settlement offer. Chem. Bank v. City of Seattle, 955 F.2d 1268, 1291 (9th Cir. 1992); see also Officers for Justice v. Civil Serv. Comm'n of City & Cty. of S.F., 688 F.2d 615, 625 (9th Cir. 1982).

2. FLSA Settlements

"The FLSA establishes federal minimum-wage, maximum-hour, and overtime guarantees that cannot be modified by contract." Genesis Healthcare Corp. v. Symczyk, 569 U.S. 66, 69 (2013). Because an employee cannot waive claims under the FLSA, they may not be settled without supervision of either the Secretary of Labor or a district court. See Barrentine v. Ark.-Best Freight Sys., Inc., 450 U.S. 728, 740 (1981); Beidleman v. City of Modesto, No. 1:16-cv-01100-DAD-SKO, 2018 WL 1305713, at *1 (E.D. Cal. Mar. 13, 2018); Yue Zhou v. Wang's Rest., No. 05-cv-0279 PVT, 2007 WL 2298046, at *1 n.1 (N.D. Cal. Aug. 8, 2007). Employeesmay bring collective actions under the FLSA, representing all "similarly situated" employees, but "each employee [must] opt-in to the suit by filing a consent to sue with the district court." Does I thru XXIII v. Advanced Textile Corp., 214 F.3d 1058, 1064 (9th Cir. 2000); see also Jones v. Agilysys, Inc., No. C 12-03516 SBA, 2014 WL 108420, at *2 (N.D. Cal. Jan. 10, 2014).

The Ninth Circuit has not established criteria for district courts to consider in determining whether an FLSA settlement should be approved. Dunn v. Teachers Ins. & Annuity Ass'n of Am., No. 13-CV-05456-HSG, 2016 WL 153266, at *3 (N.D. Cal. Jan. 13, 2016). However, district courts in this circuit have frequently applied a widely-used standard adopted by the Eleventh Circuit, which looks to whether the settlement is a fair and reasonable resolution of a bona fide dispute. Id.; see also Lynn's Food Stores, Inc. v. United States, 679 F.2d 1350, 1352-53 (11th Cir. 1982); Selk v. Pioneers Mem'l Healthcare Dist., 159 F. Supp. 3d 1164, 1172 (S.D. Cal. 2016); Nen Thio v. Genji, LLC, 14 F. Supp. 3d 1324, 1333 (N.D. Cal. 2014); Yue Zhou, 2007 WL 2298046, at *1. "A bona fide dispute exists when there are legitimate questions about the existence and extent of Defendant's FLSA liability." Selk, 159 F. Supp. 3d at 1172 (internal quotation marks and citation omitted). A court will not approve a settlement of an action in which there is certainty that the FLSA entitles plaintiffs to the compensation they seek, because doing so would shield employers from the full cost of complying with the statute. Id.

Once it is established that there is a bona fide dispute, courts often apply the Rule 23 factors for assessing proposed class action settlements when evaluating the fairness of an FLSA settlement, while recognizing that some of those factors do not apply because of the inherent differences between class actions and FLSA actions....