Posts belonging to Category Settlements

Settlement Delivers $228M to FedEx Drivers

After over 10 years of litigation, a settlement has finally been proposed in a case alleging that FedEx misclassified more than 2,300 California truck drivers who worked for the company between 2000 and 2007. The drivers’ complaint alleged that they were classified as independent contractors, rather than employees; the latter would afford the drivers certain protections such as overtime pay, reimbursement for certain business expenses, and meal and rest periods.

The settlement follows a 2014 order from the Ninth Circuit overturning a lower court’s denial of the plaintiffs’ motion for partial summary judgment on the question of whether they were improperly classified as independent contractors. Alexander v. FedEx Ground Package Sys., 765 F.3d 981 (9th Cir. 2014) (available here) (previously covered by the ILJ here). In Alexander, the Ninth Circuit evaluated a number of different factors under California’s right-to-control test, which courts use to determine whether a company has the right to control the manner and means of its employees’ work. Id. at 988. The Alexander court found that FedEx mandated workers’ clothing “from their hats down to their shoes and socks,” and also required drivers to adhere to a specific work schedule, both of which exemplify a company’s control over the manner and means of the work performed. Id. at 990. As such, the Ninth Circuit determined that “FedEx [had] a broad right to control the manner in which its drivers perform their work,” and that the FedEx truck drivers were employees as a matter of law. Id. at 997.

The proposed settlement will require approval of a California federal judge. If approval is granted, it will finally resolve the claims of the 2,300 FedEx truck drivers misclassified as independent contractors.

Authored by: 
Bevin Allen Pike, Senior Counsel

Revamped Home Depot Settlement Passes Inspection

On May 20, 2015, the United States District Court for the Northern District of California granted final approval of a $1.5 million wage-and-hour class action settlement in Barrera v. Home Depot USA, Inc., No. 5:12-cv-5199 (N.D. Cal. May 20, 2015). See Order Granting Final Approval here, Amended Settlement Agreement here. Judge Lucy H. Koh gave her blessing to a revised settlement just over a year after denying preliminary approval of the parties’ original settlement agreement. See Order Denying Preliminary Approval here.

At the core of this case are penalties under California Labor Code § 203, which provides for the continuation of wages for terminated employees for up to 30 days when employers willfully fail to pay timely final wages. The Barrera plaintiffs contend that Home Depot delayed payments of final wages to fired workers between September 2009 and September 2014, in violation of Labor Code § 201. In her May 6, 2014 order denying preliminary approval, Judge Koh observed that, during the class period, Home Depot failed to pay 6,648 fired employees their final wages on the date of termination, as California law requires. Further, only 66% of those 6,648 employees were paid final wages within three days of their terminations, and only 75% of them were paid within seven days. The plaintiffs’ counsel calculated the average hourly wage at $10-13 per hour and the average daily wage rate at $100-$150. The plaintiffs also estimated, based on actual data provided by Home Depot, that Home Depot’s total exposure was $3,573,519. The initial settlement provided for a settlement fund of $1.4 million.

Judge Koh noted two problems with the initial settlement that prevented her from granting preliminary approval. First, although $945,000 of the settlement fund was made available to class members, the funds were to be distributed on a claims-made basis, with a provision obligating Home Depot to pay at least 50% of those funds. Judge Koh ruled that the provision was not fair and adequate to class members because it disincentivized parties from maximizing participation. In fact, because the plaintiffs’ counsel would request 25% of the total settlement fund regardless of the participation rate, the settlement’s structure set the stage for a potential conflict of interests, whereby the plaintiffs’ counsel could bargain with a defendant for a lowered minimum payment obligation in return for a higher settlement fund and—as a result—a higher potential fee award. Judge Koh pointedly ruled that “[s]uch settlement structures may artificially inflate the total settlement fund and render the total settlement fund illusory in order to justify a higher attorney’s fees award.” See Order Denying Preliminary Approval, at 3. Second, the settlement provided for a 60-day claim submission deadline that would not be extended, even if the initial class notice was returned as undeliverable. The court ruled that the provision was “not conducive to maximizing class members’ participation in the settlement.” Id.

On January 15, 2015, the parties moved for final approval of a revised settlement. The revised settlement contained four major changes: (1) it increased the gross settlement amount from $1.4 million to $1.5 million; (2) it eliminated both the claims process and the reversion provision for unclaimed funds (instead designating two cy pres recipients); (3) it extended the time frame to object or opt out from 60 to 90 days; and (4) it provided each class member with an estimate of damages and the formula used to calculate the pro rata payment with the class notice. With these adjustments, the court approved the revised settlement.

The takeaway from the case history is that judges typically look harder at claims-made settlements, and even more so when they contain a relatively low minimum payment provision coupled with a reversion to the defendant. Courts will always be concerned about whether class counsel is truly maximizing the benefit to the class or is merely settling to secure a fee award. To maximize the settlement benefits to the class members, and thereby avoid having preliminary approval denied, the optimal course of action is to negotiate a direct distribution (i.e., no claims process) to the class members with no reversion, as the parties did in their revised settlement. In the alternative, one might provide for a claims-made settlement that includes a high minimum payment amount either with or without a reversion, preferably without. In such cases, those class members who expend the time and effort to submit claim forms will be rewarded with significant benefits from the settlement.

Authored by: 
Andrew Sokolowski, Senior Counsel

Cy Pres Settlement Approved in Google Privacy Action

Last month, a Northern District of California judge finally approved an $8.5 million settlement of a class action challenging Google Inc.’s privacy policies. The plaintiffs alleged that Google invaded their and class members’ privacy rights by sharing personal information with third parties without authorization. Specifically, the plaintiffs alleged that Google improperly shared search terms—including credit card numbers, medical information, and other private data—with advertisers and other third parties. See Order Granting Motion for Final Approval, In re Google Referrer Header Privacy Litig., No. 10-4809 (N.D. Cal. March 31, 2015) (available here).

The settlement is notable in that Google is not required to compensate the class members directly. Rather, the company will distribute proceeds to the AARP Foundation, the World Privacy forum, and to four university-based, Internet-related foundations. The court justified its decision by noting that it would be impractical to distribute the settlement fund to the nearly 130 million class members affected by the challenged practices. Under these circumstances, the Court found that the proper approach would be to put the funds to the next best use (i.e., donating them to public interest organizations focusing on privacy issues) under the cy pres doctrine.

The cy pres doctrine provides a solution for cases where the class members are difficult to identify and/or where the individual class member damages are minimal. These cases include consumer class actions, because few class members maintain records of purchases of inexpensive goods, as well as cases where the costs of class settlement administration would exceed class members’ individual recoveries. In such instances, the obvious alternative to the defendant keeping its ill-gotten gains is for the court to award the settlement funds or judgment to non-profit organizations that promote the policies underlying the laws that the defendant violated. With a growing number of class actions brought on behalf of millions of affected class members, such as data breach cases, we expect cy pres awards to become increasingly common.

Authored by: 
Stan Karas, Senior Counsel

Settlement Process Speeds Along in Toyota Unintended Acceleration Litigation

In a Joint Status Report filed on March 17, 2015, with Judge James V. Selna in the Central District of California, the parties informed the court that settlement deals continue to be made at a steady pace in In Re: Toyota Motor Corp. Unintended Acceleration Marketing, Sales Practices, and Products Liability Litigation (“In Re: Toyota”). In Re: Toyota, No. 10-2151, Dkt. No. 4932 (C.D. Cal. March 16, 2015) (Joint Status Report, available here).

This multidistrict litigation (“MDL”) is made up of hundreds of individual suits alleging negligence and product liability based on a defect in some Toyota models which caused the vehicles to accelerate suddenly, leading to numerous accidents. Plaintiffs are seeking compensatory and punitive damages for injuries and/or deaths caused by the unintended acceleration. So far, a total of 289 cases have either settled or reached an agreement to settle in principle, including: 132 of 171 cases consolidated in the MDL; 45 of 84 cases consolidated in the Judicial Council Coordinated Proceeding (“JCCP”); and 112 individual cases litigated outside of the consolidated proceedings.

In the Joint Status Report, the parties attribute the efficacy of the litigation to the Intensive Settlement Process (“ISP”), which was confirmed and adopted on January 14, 2014, stating that the “ISP is continuing to make good progress.” Report at 2. Case in point, of the 39 unintended acceleration lawsuits still pending in the MDL, all but four have requested ISP, and of the 39 cases remaining in the JCCP, all but two have requested it.

These settlements come more than five years after Toyota began recalling millions of vehicles for the unintended acceleration defect and more than thirteen months after counsel for Toyota contacted the 300+ plaintiffs’ attorneys to inform them of the proposed settlement process. Since each case is being negotiated separately, the total value of the settlement will not be clear until all of the cases are resolved. In a related class action settlement that won final approval before Judge Selna in July of 2013, Toyota agreed to pay an estimated $1.1 billion to settle a claim that the unintended acceleration defect diminished the value of the class vehicles. The settlement also provided for $200 million in plaintiffs’ attorney fees and up to $27 million in expenses.

In addition to over a billion dollars in legal settlements so far, Toyota was also hit with a $1.2 billion criminal penalty by the United States Department of Justice in March of 2014. U.S. Attorney General Eric Holder described Toyota’s actions as “shameful” and a “blatant disregard” for the law. He went on to warn that “other car companies should not repeat Toyota’s mistake.” U.S. Attorney General Eric Holder, Press Conference at the Department of Justice (March 19, 2014).

Thus, while Toyota may be nearing the end of its civil litigation involving the unintended acceleration defect, the automotive and legal industries will feel its effects for years to come.

Authored by: 
Lucas Rogers, Associate