McClure v. Brand Energy Serv.

Marlin McClure, an individual, for himself and those similarly situated, Plaintiff, v. Brand Energy Service, LLC, et al., Defendants.

No. 2:18-cv-01726-KJM-AC

UNITED STATES DISTRICT COURT FOR THE EASTERN DISTRICT OF CALIFORNIA

May 26, 2021

ORDER

Plaintiff Marlin McClure moves for preliminary approval of settlement of his class, collective and PAGA claims. Mot., ECF No. 60.¹ Defendant Waveland Services, Inc. filed a statement of non-opposition. ECF No. 61. The court grants the motion as explained below.

I. BACKGROUND

Waveland employed plaintiff as a sandblaster painter, supervisor, and relief foreman on an oil platform off California's coast. Second Am. Compl. ("SAC") ¶ 10, ECF No. 59; McClure Decl. ¶ 2, ECF No. 64. Plaintiff and similarly situated employees worked twelve-hour shifts daily with one 30-minute meal period and two rest periods. SAC ¶ 4. He alleges Waveland didnot pay employees meal or rest period premiums and did not itemize meal and rest period earnings in employees' wage statements. Id. ¶ 5. He also alleges Waveland provided free meals and lodging to him and similarly situated employees but did not account for the value of these meals and lodging when calculating overtime wages. Id. ¶ 6. Finally, he alleges Waveland did not pay minimum wages to him and other similarly situated employees. Id.

While this case was pending, the Supreme Court granted certiorari in Parker Drilling Management Services, Ltd. v. Newton. See 139 S. Ct. 914 (2019). In Parker, the Court agreed to consider whether California law would be adopted as surrogate federal law under the Outer Continental Shelf Lands Act ("OCSLA") § 4 (43 U.S.C. § 1333(a)(2)(A)). Petition for Writ of Certiorari, Parker Drilling Mgmt. Servs., 139 S.Ct. 914 (No. 18-389). The Court's decision to hear Parker Drilling had significant implications for the value and viability of plaintiff's claims here. Originally, plaintiff's minimum wage claims were based solely on California wage and hour law, which plaintiff insisted applied to the Outer Continental Shelf ("OCS"), First Am. Compl. ¶¶ 1-9, ECF No. 17, and plaintiff relied heavily on the Ninth Circuit's ruling in Newton v. Parker Drilling Management Services, Ltd., 881 F.3d 1078, 1099 (9th Cir. 2018), the decision for which the Supreme Court granted certiorari. Mot. to Stay ¶ 5, ECF No 26. The parties thus executed a tolling agreement that would permit certain amendments to the complaint, and the court stayed this litigation until the Supreme Court issued its decision in Parker Drilling. See Ellison Decl. ¶¶ 18 & 19, ECF No. 60-1; Order to Stay, ECF No. 27.

In its decision, the Supreme Court held that California wage and hour law does not operate as surrogate federal law under OCSLA. Parker Drilling, 139 S. Ct. 1881, 1893 (2019). The Court dismissed Newton's state law overtime and minimum wage claims and remanded the remaining state law claims for the lower court to determine the extent to which other California labor law could be adopted and applied to the OCS. Id. The Court's decision was adverse to plaintiff in this case because it meant plaintiff's claims for state minimum wages and overtime "fail[ed] as a matter of law" and the viability of his other state law claims remained unsettled. Mot at 23-24. Plaintiff sought to file a second amended complaint to replace his state law overtime and minimum wage claims with overtime claims under federal law and clarify that theremaining state law claims survived because there are no federal laws applicable to the issues relevant to his case. Mot. for Leave to File Second Am. Compl. at 4, ECF No. 36. The parties stipulated to plaintiff's filing of the second amended complaint, which is the operative complaint. See Stip., ECF No. 55; Minute Order, ECF No. 57; SAC ¶ 9. The amended complaint includes claims under the California Labor Code, the federal Fair Labor Standards Act ("FLSA"), and California's Unfair Competition Law ("UCL"). SAC ¶¶ 6-9. Plaintiff also seeks civil penalties under California's Private Attorney General Act ("PAGA"), Cal. Labor Code § 2698 et seq. Id. ¶ 68.

The complaint is styled as a putative Rule 23 class action and FLSA collective action. Id. ¶¶ 18, 24. The Rule 23 class (the "California class" or "putative class") would include those with state law claims, i.e., plaintiff and any similarly situated hourly employees who, in the four years before this case began, worked shifts of twelve hours or more on oil platforms off the coast of California. Id. ¶ 18. The FLSA collective would include plaintiff and any similarly situated hourly employees who, within the three years before this case began, worked more than forty hours in a single workweek on oil platforms off any coast of the United States and who were given meals, lodging, or both in addition to their wages. Id. ¶ 24.

The parties reached an agreement to settle the proposed class and collective claims after participating in mediation with Steven G. Pearl, who has been recognized as "a well-respected mediator in wage and hour matters." Contreras v. Worldwide Flight Servs., Inc., No. 18-6036, 2019 WL 8633664, at *8 (C.D. Cal. Sept. 30, 2019). Waveland agreed to pay a "Gross Settlement Value" of $290,000.00. Settlement Agreement ¶¶ 30-33, ECF No. 60-2. Under an "escalator clause," if by the time of preliminary approval, the number of individuals in either the California class or the FLSA collective has increased by 7 percent or more, Waveland will increase the gross settlement value on a pro-rata basis by a percentage equal to the percentage increase in the class or collective size. Settlement Agreement ¶ 58(g). Waveland may terminate the settlement agreement if more than 7 percent of the California class members opt out. Id. ¶ 86.

Several deductions would be taken from the gross settlement value before it is distributed to the California class and the FLSA collective. First, Waveland agreed not to object to anattorneys' fee award of up to 33 percent of the Gross Settlement Value, or $95,700, and an award of litigation expenses of up to $7,500. See id. ¶¶ 2, 20. Second, the agreement proposes a "service" or incentive award of $5,800 to plaintiff. See id. ¶ 49. Third, under California law, the California Labor and Workforce Development agency will be paid 75 percent of any amounts awarded under the PAGA. See Cal. Lab. Code § 2699(i). Here, that provision results in an effective deduction from the total settlement amount of $5,800 with $4,350 being paid to the California Labor and Workforce Development Agency (LWDA) and the remaining 25 percent paid to the California class members. See Settlement Agreement ¶ 42. Fourth, the Gross Settlement Value would be reduced by the amount of any administration costs, but the agreement limits that deduction to $12,500. Id. ¶¶ 2, 38. Any administration costs greater than $12,500 will be deducted from the proposed fee and expense awards to counsel. Id. After these deductions, the estimated Net Settlement Value at the time the settlement agreement was reached was $162,700.00, just above half of the Gross Settlement Value. Id. ¶ 38. From the Net Settlement Value, 40 percent would be distributed to the California class and 60 percent would be distributed to the FLSA collective. Id. The payments to each employee would be prorated by the number of weeks they worked at Waveland. Mot. at 18-20.

If this court approves the settlement agreement, a settlement administrator would distribute two notice packets within twenty days of the court's order granting preliminary approval.

First, the administrator would send a notice packet to California class members. Settlement Agreement ¶ 68. California class members will not be required to submit a claim form to receive a distribution, but they may opt out or object within forty-five days. Mot. at 19-20. Once checks are delivered, checks not cashed after ninety days would be voided. Mot. at 20. If the value of voided checks exceeds $20,000, the unclaimed funds will be reallocated pro rata to those who did cash their checks. Settlement Agreement ¶ 81. If the value of unclaimed funds does not exceed $20,000, the amount would be "allocated to a suitable cy pres recipient, including at Plaintiff's choice, the Legal Aid Foundation of Los Angeles." Id.

///// Second, the settlement administrator would send a notice packet to FLSA collective members. Id. ¶ 68. The packet will advise the class members of their minimum settlement allocations and the opportunity to opt into the FLSA collective. Id. ¶¶ 68-69. Recipients would have forty-five days to opt in. Id. ¶¶ 69-72. The settlement administrator will follow up each week of the forty-five-day period by phone and email. Id. The allocation for any member that does not opt in will be reallocated on a pro rata basis to collective members that are participating upon distribution of the relevant settlement funds.

II. LEGAL STANDARD

"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) (quoting Hanlon v. Chrysler Corp., 150 F.3d 1011, 1026 (9th Cir. 1998), overruled in part on other grounds by Wal-Mart Stores, Inc. v. Dukes, 564 U.S. 338 (2011)). In settlement classes, the class's motivations may not perfectly square with those of its attorneys. See id. An attorney representing a settlement class may be tempted to accept an inferior settlement in return for a higher fee. Knisley v. Network Associates, Inc., 312 F.3d 1123, 1125 (9th Cir. 2002). Likewise, defense counsel may be happy to pay his counterpart a bit more if the overall deal is better for his client. See id.; see also In re Gen. Motors Corp. Pick-Up Truck Fuel Tank Products Liab. Litig., 55 F.3d 768, 778 (3d Cir. 1995) (noting criticism that settlement class can be "vehicle for collusive settlements that primarily serve the interests of defendants—by granting expansive protection...