Posts belonging to Category Settlements

Cal. Supreme Court to Decide on Attorneys’ Fees Calculation Method in Laffitte v. Robert Half

Even seasoned class action practitioners might be surprised to learn that the percentage-of-the-fund method for awarding attorneys’ fees is not settled law in California. After all, California trial courts routinely award attorneys’ fees based on a percentage of the overall recovery, and numerous California courts have endorsed this approach. [1] This common practice has been called into question by David Brennan, an objector to the $19 million wage-and-hour class action settlement in the long-running Laffitte v. Robert Half Int’l, No. S222996, rev. granted, 342 P.3d 1232 (Feb. 25, 2015). [2] Laffitte, which was initially filed in 2004, involved independent contractor misclassification claims against the staffing agency Robert Half; in 2013, the trial court approved a $19 million settlement, including an attorneys’ fee award of one-third of the gross settlement.

In Laffitte, the California Supreme Court will decide whether use of the percentage method is valid under California law. In his petition for review and opening brief (available here and here, respectively), Objector Brennan seized on a footnote from Serrano v. Priest, 20 Cal.3d 25, 48 n. 23 (1977), where the California Supreme Court stated that “the starting point of every fee award . . . must be a calculation of the attorney’s services in terms of the time he has expended on the case,” to argue that California law requires use of the lodestar method for assessing fees. The lodestar method multiplies the number of hours reasonably expended by a reasonable hourly rate, and the resulting number can be adjusted at the court’s discretion. While Brennan correctly identified a source of potential confusion, his radical position, if adopted, would unsettle the landscape, upending not just the settlement in Laffitte, where the trial court awarded attorneys’ fees representing 33 1/3% of the settlement fund, but numerous other already-approved settlements. Further, the vast majority of California class action settlements currently pending final approval would have to be renegotiated.

However, there is little doubt that the California Supreme Court will enshrine the use of the percentage method for cases where an ascertainable fund is created. As Respondent Mark Laffitte discussed in his Answering Brief (available here), every Federal Circuit has authorized use of percentage method, with two Circuits, the Eleventh Circuit and the District of Columbia Circuit, requiring use of the percentage method for common fund cases. This is because the percentage method has several significant advantages over the lodestar method: (1) it is less demanding of judicial resources; (2) it connects the fee recovery more closely to the results obtained; (3) it aligns the interests of class members and class counsel; (4) it rewards efficient prosecution; (5) it better approximates the workings of the marketplace; and (6) it leads to greater predictability in fee awards. Lafitte Answering Brief at 35-39 (internal citations omitted).

California also has a venerable tradition of utilizing the percentage method for common fund cases, as detailed in Serrano itself. See Serrano, 20 Cal.3d at 34-38 (observing that the percentage method was first approved in California in 1895 and “has since been applied by the courts of this state in numerous cases”). Serrano declined to apply the percentage method principally because the settlement there did not create an ascertainable fund. Id. at 35-38. Contrary to Brennan’s position, there is nothing in Serrano that would preclude courts from applying the percentage method in awarding attorneys’ fees.

Although Laffitte presents only one question for review—whether the percentage method is permitted under Serrano—several open questions remain even if the Court cements the use of the percentage method. Among other issues, the Court may also decide whether a benchmark percentage is appropriate, and whether to require a “lodestar cross-check” if a court applies the percentage method in awarding fees. In sum: do not expect a sea change, but class action practitioners should nonetheless keep a close watch on Laffitte to see if the Court will provide further guidance to courts on when and how to apply the percentage method.

Authored By:
Ryan Wu, Senior Counsel

[1] See, e.g., In re Consumer Privacy Cases, 175 Cal. App. 4th 545, 558 (2009), Chavez v. Netflix, Inc., 162 Cal. App. 4th 43, 63 (2008), and Apple Computer v. Superior Ct., 126 Cal. App. 4th 1253, 1271 (2005).
[2] Capstone Law APC, on behalf of its clients, submitted a letter requesting publication that contributed to the publication of the intermediate court decision, Laffitte v. Robert Half Int’l Inc., 231 Cal. App. 4th 860 (2014), and intends to submit an amicus brief supporting Respondent Laffitte.

Survey Says. . . Gallup to Settle TCPA Litigation for $12 Million

Gallup, Inc. has agreed to pay up to $12 million to settle three separate class actions which alleged that the Washington D.C.-based pollster violated the Telephone Consumer Protection Act of 1991 (“TCPA”) by autodialing class members’ cell phones without their prior consent. Soto v. The Gallup Organization, Inc., No. 13-61747 (S.D. Fla., complaint filed Aug. 12, 2013). See Plaintiffs’ Motion for Preliminary Approval of Class Action Settlement (May 15, 2015) available here, Settlement Agreement (May 15, 2015) here, and Order Granting Preliminary Approval (June 16, 2015) here.

Congress passed the TCPA in response to consumer complaints about invasive telemarketing practices, including “robodialing,” or the use of automatic telephone dialing systems (“ATDS”) to deliver artificial or prerecorded voice messages. Among other practices, the TCPA prohibits “a[] person . . . [from making] any call (other than a call made for emergency purposes or made with the prior express consent of the called party) using any [ATDS] or an artificial or prerecorded voice . . . to any telephone number assigned to a . . . cellular telephone service.” 47 U.S.C. § 227(b)(1). The TCPA directs the Federal Communications Commission (“FCC”) to prescribe implementing regulations, and creates a private cause of action for individuals to receive $500 in damages for each violation, or treble damages for all “willful” and “knowing” violations.

The Soto plaintiffs alleged that Gallup robodialed over 6.9 million cell phones during the class period. These calls were allegedly placed using an ATDS that had the capacity to store or produce numbers and dial them at random. Under the preliminarily approved settlement, Gallup agreed to establish a $12 million settlement fund, including $4 million in attorneys’ fees and costs, $2.5 million in settlement administration costs, and $2,000 incentive awards to each of the three plaintiffs. The $5.5 million balance will be divided evenly among all class members who submit claims for payment. Based on previous settlements, the parties anticipate that participating class members will receive between $25 and $80 per claim.

According to the FCC, TCPA complaints comprise the largest category of informal complaints filed with the agency. See FCC Encyclopedia, Quarterly Reports-Consumer Inquiries and Complaints, Top Complaint Subjects. The FCC received “approximately 63,000 complaints about illegal robocalls each month” during the fourth quarter of 2009, and “[b]y the fourth quarter of 2012, robocall complaints had peaked at more than 200,000 per month.” See Federal Trade Commission Staff’s Comments on Public Notice DA 14-1700 Regarding Call Blocking, CG Docket No. 02-278, WC Docket No. 07-135, at 2 n.5 (Jan. 23, 2015). The FTC also reports that, “[f]rom October 2013 to September 2014, [it] received an average of 261,757 do-not-call complaints per month, of which approximately 55% (144,550 per month) were complaints about robocalls.” Id. at 2 n.4. TCPA litigation is likewise on the rise. According to one estimate, “TCPA lawsuits were up 116 percent in September 2013 compared to September 2012. Echoing that trend, year-to-date TCPA lawsuits have increased 70 percent in 2013.”

Authored By:
Eduardo Santos, Associate

Federal District Court Approves $40 Million Data-Throttling Settlement

On July 2, 2015, Judge Edward M. Chen of the Northern District of California granted final approval of a $40 million settlement reached between the Federal Trade Commission (“FTC”) and TracFone Wireless, Inc., d/b/a Straight Talk Wireless, Net10 Wireless, Simple Mobile, and TelCel America (“TracFone”). See In Re TracFone Unlimited Service Plan Litig., No. 13-3440 (N.D. Cal. July 2, 2015) (Order Granting Motion for Final Approval of Class Action Settlement and Granting for Award of Attorneys’ Fees, Costs, and Representative Service Awards) (available here). Class members alleged that TracFone advertised and sold “unlimited” data plans that, in reality, were quite the opposite. TracFone admitted to slowing down (aka “throttling”) or suspending its customers’ data service, and sometimes terminating customers’ cellular service entirely, when those customers exceeded a monthly data usage cap set by TracFone. TracFone did not disclose the data usage cap and subsequent data interference to class members prior to their purchase of “unlimited” data plans.

The settlement provides for the disbursement of $40 million paid by TracFone to the class members in varying amounts based on the timing and level of data interference. Additionally, the court granted injunctive relief to the class, whereby TracFone must disclose “throttle limits or caps, as well as the actual speeds to which customer data will be slowed” alongside any “unlimited data” advertisements and implement a system to notify customers by SMS text message when they reach the data usage cap. Order at 13.

Judge Chen approved the settlement after considering the factors set forth in In Re Bluetooth Headset Prods. Liab. Litig., including:

(1) the strength of the plaintiff’s case; (2) the risk, expense, complexity, and likely duration of further litigation; (3) the risk of maintaining class action status throughout the trial; (4) the amount offered in settlement; (5) the extent of discovery completed and the stage of the proceedings; (6) the experience and views of counsel; (7) the presence of a governmental participant; and (8) the reaction of the class members of the proposed settlement. In Re Bluetooth Headset Prods. Liab. Litig., 654 F.3d 935, 943 (9th Cir. 2011) (citing Churchill Village, L.L.C. v. Gen. Elec., citations omitted).

The court concluded that the terms were fair to both class members and TracFone, noting that TracFone had strong defenses if the case went to trial. The FTC has propounded similar claims against AT&T. See Fed. Trade Commission v. AT&T Mobility LLC, No. C-14-4785 EMC (N.D. Cal. Oct. 28, 2014).

Authored by: 
Trisha Monesi, Associate

Disney Reaches Vacation Pay Settlement with Former Employees

A settlement was reached last week in Zorio v. Walt Disney Worldwide Services Inc., a case brought by former Disneyland employee Reykeel Zorio, who alleged on behalf of himself and other former employees at six Disney facilities that Disney failed to compensate departing employees for accrued vacation time. See Zorio v. Walt Disney Worldwide Services Inc., No. BC549292 (Los Angeles Cty. Sup. Ct. 2014, consolidated with No. BC540154). Originally filed in March 2014 as a representative action, the claims relating to vacation wages were filed again in June 2014 as a class action.  The cases were subsequently consolidated and alleged that the defendants in the action failed to provide earned and vested vacation wages within any permissible time period to employees upon termination or separation.

The proposed settlement will reportedly pay $500,000 to more than 4,000 hourly-paid, non-exempt workers. The decision helps to reinforce the principle that paid vacation is a form of wages, earned as labor is performed, and is therefore compensable upon termination of employment pursuant to California Labor Code section 227.3, as well as sections 201-204.

While an employer is not required to provide its employees with vacation time, California law imposes restrictions on any policy, practice, or agreement implemented to provide paid vacation, and accrued vacation time is considered wages. See Suastez v. Plastic Dress-up Co., 31 Cal. 3d 774 (1982). An employee has no entitlement to be paid for accrued but unused vacation until the employee quits or is discharged. However, all earned and unused vacation must be paid to the employee at his or her final rate of pay within three days of termination of employment. Cal. Lab. Code § 227.3. The Disney Corporation learned this rule the hard way in Zorio.

Authored by: 
Karen Wallace, Associate