Third Time’s the Charm for Karapetyan v. ABM Wage-and-Hour Settlement

Following three rounds of briefing in support of Plaintiff Vardan Karapetyan’s motion for preliminary approval of his class action settlement, on June 12, 2017, U.S. District Judge George H. Wu granted preliminary approval of a $5 million wage-and-hour settlement on behalf of current and former employees of Defendants ABM Industries Incorporated and ABM Security Services, Inc. in Karapetyan v. ABM Industries Inc., et al., No. CV15-08313GW, Order Granting Preliminary Approval of Class Action Settlement (C.D. Cal. June 12, 2017) (slip op. available here).

The plaintiff alleged that ABM violated the California Labor Code by not providing class members with meal and rest breaks; failing to pay premium wages for missed meal and rest breaks, overtime wages, other unspecified unpaid wages, and wages upon termination; and by failing to provide accurate wage statements. Following the California Supreme Court’s decision in Augustus v. ABM Security Services, Inc. (2016) 2 Cal. 5th 257, which clarified that employers may not require employees to take on-duty and/or on-call rest periods (previously covered on ILJ here), the parties agreed to participate in mediation. With the mediator’s guidance, the parties settled the claims for a $5 million non-reversionary common fund, inclusive of class member payments (proportional to the number of weeks each class member worked during the class period), administrative costs, an incentive award, attorneys’ fees and costs, a payment to the Labor and Workforce Development Agency, and payroll taxes. The plaintiff moved for preliminary approval of the class action settlement on April 19, 2017.

On May 1, 2017, Judge Wu denied the motion on class certification grounds; namely, that Karapetyan had failed to demonstrate through sufficient evidence that the typicality and predominance elements of conditional class certification had been met. Karapetyan v. ABM Industries Inc., et al., No. CV15-08313GW, Order Denying Preliminary Approval of Class Action Settlement (C.D. Cal. May 1, 2017), at 2 (slip op. available here). Within a few weeks of the denial, the plaintiff renewed his motion for preliminary approval with an expanded typicality and predominance analysis. The renewed motion persuaded Judge Wu that conditional certification of the proposed settlement class was appropriate, but fell short of demonstrating to his satisfaction that the settlement was within the range of possible approval: “ . . . Plaintiff does not appear to provide the Court with any information of what amount he believes may have been recoverable if this case were litigated to completion. While the Court recognizes that settlement of complex actions such as the instant one are seen as favorable, . . . it may be difficult for the Court to determine whether the settlement figure is “within the range of possible approval” absent some information on the potential recovery. Plaintiff also does not indicate what the average recovery might be as a result of the settlement.” Karapetyan v. ABM Industries Inc., et al., No. CV15-08313GW, Order on Amended Motion for Preliminary Approval (C.D. Cal. June 5, 2017), at 4-5 (slip op. available here).

In the third and final round of briefing, the plaintiff argued that that the maximum possible award at trial would be between $12 and $16 million dollars, given which, the settlement was within the range of possible approval:

Augustus provides a benchmark [for evaluating the claims in this case], as it was litigated to completion under similar facts. Augustus was a $90 million judgment covering 10 years, almost 15,000 employees and certain undisputed evidence which led to a finding of liability, damages, interest and penalties. The case before this Court has about 4 years of exposure, 7,000 employees, the possibility of arbitration agreements impacting or limiting the litigation, less pre-judgment interest, and different testimony and documentation on liability. I believe the recovery in this case, had it proceeded, would reasonably be in the range of $12 million to $16 million.

Karapetyan v. ABM Industries Inc., et al., No. CV15-08313GW, Declaration of Michael B. Adreani in Support of Amended Motion for Preliminary Approval, at 6 (available here).

On the strength of these recitals, Judge Wu found that the settlement was within the range of possible approval, and, after having reviewed and approved the parties’ amendments to the settlement (the parties were asked to amend the settlement to address certain “nits”), granted preliminary approval of the $5 million settlement. Note that despite having to submit three rounds of briefing in support of the motion for preliminary approval, the concise analysis above was all that was needed to establish that the settlement was within the range of reasonableness. This is because at the preliminary approval stage, the moving party need only establish that the settlement is “’within the range of possible approval’ and whether or not notice should be sent to class members” rather than whether the settlement is in fact “fair, reasonable, and adequate,” pursuant to Fed. R. Civ. P. 23(e)(2), a determination which is made at the final approval stage. Karapetyan v. ABM Industries Inc., et al., No. CV15-08313GW, Order on Amended Motion for Preliminary Approval (C.D. Cal. June 5, 2017), at 2-3.

The final fairness hearing is set for September 7, 2017, at 8:30 a.m.

Authored by:
Eduardo Santos, Associate
CAPSTONE LAW APC