Opinion
B226691
12-19-2011
KAREN KEELER et al., Plaintiffs and Respondents, v. AIG DOMESTIC CLAIMS, INC., et al., Defendants and Respondents; GARY JANICH et al., Objectors and Appellants.
Blumenthal, Nordrehaug & Bhowmik, Norman B. Blumenthal, Kyle R. Nordrehaug and Aparajit Bhowmik for Objectors and Appellants. Spiro Moss and Ira Spiro for Plaintiffs and Respondents. Paul, Hastings, Janofsky & Walker, Elena R. Baca and Sandra N. Benjamin for Defendants and Respondents.
NOT TO BE PUBLISHED IN THE OFFICIAL REPORTS
California Rules of Court, rule 8.1115(a), prohibits courts and parties from citing or relying on opinions not certified for publication or ordered published, except as specified by rule 8.1115(b). This opinion has not been certified for publication or ordered published for purposes of rule 8.1115.
(Los Angeles County Super. Ct. No. BC395613)
APPEAL from an order of the Superior Court of Los Angeles County. Ronald M. Sohigian, Judge. Affirmed.
Blumenthal, Nordrehaug & Bhowmik, Norman B. Blumenthal, Kyle R. Nordrehaug and Aparajit Bhowmik for Objectors and Appellants.
Spiro Moss and Ira Spiro for Plaintiffs and Respondents.
Paul, Hastings, Janofsky & Walker, Elena R. Baca and Sandra N. Benjamin for Defendants and Respondents.
INTRODUCTION
Karen Keeler brought a class action lawsuit against AIG Domestic Claims, Inc., and other related companies, on behalf of AIG workers' compensation insurance claims adjusters. The suit asserted claims for various alleged wage and overtime violations. The parties settled the action. Appellants filed an objection, and now appeal the trial court's approval of the settlement. Appellants contend the trial court did not have an adequate record to properly determine whether the settlement was fair, adequate and reasonable. Appellants also contend the settlement agreement's release of claims was overbroad, improper, and unfair. We find no abuse of discretion in the trial court's approval of the settlement.
FACTUAL AND PROCEDURAL BACKGROUND
In August 2008, Karen Keeler filed a class action complaint against AIG Domestic Claims, Inc., AIG Insurance Company, AIG Claims Services, Inc., AIG Claims Services, and AIG Corporation (collectively AIG). Keeler was a workers' compensation insurance claims adjuster for AIG. The complaint alleged AIG failed to: pay Keeler and similarly situated employees overtime compensation (Lab. Code, §§ 510, 1194); provide meal and rest periods (Lab. Code, §§ 226.7, 512); properly pay discharged employees (Lab. Code, §§ 201, 202, 203); provide itemized wage statements to employees (Lab. Code, § 226); and that AIG committed unfair business practices (Bus. & Prof. Code, § 17200). The complaint was based on the theory that AIG misclassified class members as exempt from overtime requirements.
In June 2009, the parties reached a settlement during a mediation with an experienced private mediator. In October 2009, Keeler sought preliminary approval of the settlement. Per the settlement agreement, the class was defined as claims adjusters who worked in AIG's workers' compensation division in California as "claim representatives" or "senior claim representatives," between August 1, 2004, and the date of the preliminary approval of the settlement agreement. The agreement provided for a maximum settlement amount of $1,400,000, from which the parties would subtract settlement administrator expenses, an enhancement payment to Keeler, and attorneys' fees and litigation expenses. Keeler estimated $918,000 would remain to be paid to class members in settlement.
AIG agreed not to oppose Keeler's application for 33 percent of the maximum settlement amount as the total to be allotted for the enhancement payment, attorneys' fees, and litigation expenses.
Individual class member payments would be calculated based on the number of "workweeks" the class member was employed by AIG between August 1, 2004, and the date of preliminary settlement approval. No claims were required. Instead, all class members would receive payments unless they opted out of the class. In seeking preliminary approval of the settlement, the parties indicated there were 339 class members, each of whom would each receive an approximate average recovery of $2,700.
By final approval of the settlement, there were 345 class members.
Class members who did not opt out of the class would release "all claims asserted in the LITIGATION, as well as all other claims, known or unknown, including without limitation all claims under the California Labor Code, the California Business and Professions Code, or the Fair Labor Standards Act ("FLSA"), based on the claims alleged in the Complaint that were or could have been asserted by the SETTLEMENT CLASS from August 1, 2004 through the date of final approval of this SETTLEMENT AGREEMENT . . . ."
Class counsel argued the settlement was fair and reasonable, and offered a description of the risk that Keeler might not prevail on her misclassification theory. Class counsel pointed out that although a Court of Appeal had recently found a class of insurance claims adjusters were not exempt from overtime requirements, the California Supreme Court granted review of the decision, leading to greater uncertainty as to the current state of the law. Class counsel also explained the risk that the court might not grant class certification due to the varying job duties of class members.
The case is Harris v. Superior Court (2007) 154 Cal.App.4th 164, review granted November 28, 2007, S156555. The case has been argued and was submitted in October 2011. The Supreme Court has not yet issued a decision.
Class counsel additionally described the discovery and investigation conducted prior to the mediation. Keeler propounded 91 special interrogatories, 2 sets of form interrogatories, 100 requests for production, and 28 requests for admissions. Keeler's counsel also deposed an AIG executive from the region where Keeler worked. Keeler subsequently propounded additional interrogatories, requests for production, and requests for admissions. According to counsel, once the parties agreed to mediate, Keeler received "a great deal of information" in informal discovery. Counsel described this information as pertaining to "wage rates, numbers of workweeks worked by the class members, job descriptions for the job positions included in the class, and timesheets signed by class members." In advance of the mediation, the parties jointly created a telephone survey of class members that was conducted by a third party settlement administration firm. Counsel represented the survey "concerned primarily the number of hours the class members worked per week," and the results "figured very importantly in the mediation." The preliminary approval motion and an accompanying declaration detailed class counsel's significant experience in wage and hour class actions.
Class counsel did not discuss whether or to what extent AIG responded to this discovery.
In November 2009, the trial court heard the preliminary approval motion. The court asked the parties to provide several categories of additional information, including an explanation of the parties' discovery efforts. The court stated, "There does appear to be adequate discovery, but I maintain that the plaintiff must submit more details as to the discovery, what was done and how -- what information was yielded." The court continued the hearing on preliminary approval to allow the parties time to address the deficiencies it identified.
In response to the court's concerns, class counsel submitted a second declaration. In addition to addressing the court's concerns regarding typicality, commonality, and superiority, counsel summarized information obtained in both formal and informal discovery. Class counsel reported that AIG produced job descriptions, documents created as part of class members' work, employee handbooks, time records for Keeler and other class members, Keeler's performance evaluations, and other standardized "policy and personnel documents." Class counsel summarized some of the documents and explained the conclusions he drew from them. He cited to some documents using AIG control numbers, but did not attach any documents to the declaration. For example, in describing a category of documents that were created as part of Keeler's work, counsel explained they showed:
"(1) That plaintiff spent much of her work time doing many day-to-day operational tasks, for example, requesting documentation such as medical reports (AIG A000072), returning emails and telephone calls (AIG A000075; AIG A000010), sending out notices, ordering records, and scheduling appointments with claimants (AIG A000062). [¶] (2) That plaintiff complained in writing about the lack of clerical support. (AIG A000039.) [¶] (3) That plaintiff spent much of her time performing activities that are ministerial in nature. For example, plaintiff was required to make daily entries into claim 'diaries'. (AIGDC A000133.) [¶] (4) That class members are held to tight deadlines that are out of their control to change. (AIG A000072; AIG A000057; AIG A000061.) [¶] (5) That class members had a very small role in litigation of claims, consisting largely of communicating information to the attorney, receiving updates and advice from the attorney, and reviewing depositions. (AIG A00086.)" (Fn. omitted.)
Class counsel summarized the testimony of the AIG executive he had deposed, and conclusions he drew from the class members' time records, including that the records did not show employees took meal or rest breaks. Counsel also noted the survey of class members the parties conducted prior to mediation and reported AIG provided "information pertinent to calculations of damages and other recoverable amounts for the entire class" for mediation purposes.
AIG also filed a supplemental brief to support preliminary approval of the settlement. AIG argued the risk was significant that no class would be certified or that any certified class would be smaller than the settlement class. AIG further contended there was a risk Keeler's job would be found exempt, noting one federal district court previously found AIG properly classified the same workers' compensation claims adjuster position as exempt. AIG asserted informal discovery in the case supported its contention that "any damages regarding unpaid overtime were small."
On January 15, 2010, the trial court granted preliminary approval of the settlement. A settlement administrator sent class members notice of the settlement, providing them an opportunity to opt out of the class. The notices informed each class member of his or her total "workweeks" as reflected in AIG's records; that number would be used to calculate the settlement payment. By the end of March 2010, 8 of 345 class members had opted out of the settlement.
In March 2010, Gary Janich, Denise Kinney, and Kelly Diaz (collectively appellants) filed an objection to the proposed class settlement. Appellants argued the court should not approve the settlement because the parties failed to provide evidence establishing the amount in controversy, the realistic range of outcomes for the litigation, or the rate of pay used to calculate settlement payments. They asserted that under guidelines established in Kullar v. Foot Locker Retail, Inc. (2008) 168 Cal.App.4th 116 (Kullar), the parties had failed to provide the court with information the court needed to properly evaluate the settlement. Appellants declared that, contrary to the parties' assumption that class members worked an average of one hour of overtime per week, they had worked between 5 and more than 18 hours of overtime per week. They asserted the settlement would compensate them for only a small percentage of their total overtime claims. Appellants further argued the settlement was unfair because the settlement amount was calculated on June 10, 2009 (the date of the mediation), based on the number of workweeks through that date, but the release extended to cover claims beyond June 10, 2009. Appellants believed Keeler underestimated the strength of the class claims. They offered several additional objections to the settlement, including that it was overbroad and improperly purported to release FLSA claims, and the agreement did not allow class members to contest the number of workweeks allotted to them.
AIG responded to appellants' objections, in part with a declaration from AIG's counsel. AIG's counsel provided a more specific description of the information AIG had produced. The information included the total number of full-time equivalent workers' compensation claim representatives and senior claim representatives from 2005 onward, 109 putative class member declarations, the total number of workweeks for the two groups of claims adjusters from August 1, 2004, to April 19, 2009, the average hourly rates and average annual salaries for the two groups of adjusters for the same date range, median wage rates for the two groups for the same date range, 3,046 payroll sheets, and similar information relating to an additional category of claims adjusters.
As for the telephone survey, AIG's counsel declared those who agreed to participate reported approximately 2.8 hours of overtime per workweek on average, and 50 percent of those who responded reported no overtime. Of the 109 declarations from putative class members, the average workweek was 40.63 hours, and many adjusters worked no overtime. The average amount of reported overtime was 2.17 hours per week. According to counsel, 65.9 percent of those who responded worked no overtime and 14 percent worked more than 5 hours of overtime. AIG's counsel calculated the total potential recovery for the class for the overtime claims at $2,863,388.72. She declared that "to calculate the potential exposure based on Ms. Keeler and the putative class' claim, we took the data from the declarations, accounted for fulltime equivalents and then reviewed the actual compensation data for these employees. Applying the average compensation to those average overtime numbers, the potential recovery for the entire class of 345 is $2,863,388.72 (2.17 hours per week for all putative class members at an average hourly rate of $27.70)."
The parties gave the settlement administrator conducting the survey names and contact information for 40 class members. AIG's counsel did not indicate how many class members agreed to participate in the survey.
In April 2010, Keeler sought final approval of the settlement. In a declaration, class counsel provided additional details regarding the information Keeler had received through formal and informal discovery prior to settlement. In addition to the categories of documents identified in a previous filing, class counsel reported AIG also provided declarations from over 100 class members, "[m]edian rates of compensation for class members during the statute of limitations period, converted from their salaries to hourly rates," over 3,000 pages of class member payroll records, the settlement authorities class members had in their positions as claims adjusters, the total number of workweeks for class members during the statute of limitations period, and the total number of "full-time equivalents" for each year of that period. Class counsel declared the survey conducted by the settlement administrator, the declarations from over 100 class members, and "other evidence," indicated class members worked an average of two hours of overtime per week.
Class counsel defined "full-time equivalent" as "a term used in wage and hour class action litigation to denote a full time job position or slot for a year, whether the spot was occupied by one, two, or any number of different people during the year."
Class counsel estimated the maximum possible recovery on all of the class claims, and a total value of the claims after discounting for risk of loss. He described discounting factors relevant to each claim, such as the significant risk that Keeler would not succeed in obtaining class certification, or would lose on liability on the overtime claims; the requirement of the final wage payment claim that the defendant act willfully, as well as the difficulty of proving this element; and uncertainty in the law regarding "injury" in wage statement claims.
Class counsel estimated the maximum value of the overtime claims was $1,700,000. He later indicated this was a misstatement, and that he estimated the maximum value of the overtime claims at $1,344,000 for each hour of overtime worked, for a total of $2,688,000 for an average of 2 hours per class member.
Appellants opposed the application for final approval. They argued the court could not approve the settlement because the parties had not submitted the actual evidence underlying their evaluations of the claims. Appellants further contended the class claims were strong, both as to certification and ultimate liability. They objected to the release because it extended through the date of final approval of the settlement. Appellants demanded the parties provide the court with an accounting of the total number of workweeks involved in the settlement so that the court might independently evaluate the value of the class claims. Appellants also argued the attorneys' fee request was unreasonable.
At the April 2010 hearing on the final approval application, the trial court heard appellants' arguments at length. After reviewing the relevant case law on the record, the trial court directed class counsel to provide several categories of additional information. The court summarized its requests:
"I have indicated that I feel that I should have more specific information about the -- the specific data and about the methodology plaintiff has used to calculate the value of each claim. It seems to me that I should have the average hourly pay of the class members, a fuller statement of the determination of the risks -- for example, how did plaintiff determine that there was only a 50 percent chance of certifying the overtime claim -- what factors weighed for and against certification, how did plaintiff determine that there was a 50 percent chance of proving liability for the overtime claim? [¶] There is reference to these factors, but I feel that there needs to be further explanation and not -- not just an argumentative explanation but also a factually based explanation so that we have a record on the basis of which I can make the kind of informed decision that the cases including the Clark case, [Clark v. American Residential Services LLC (2009) 175 Cal.App.4th 785 (Clark)],which I had gone into in some length, indicate that I'm required to make."
The court additionally expressed concern about the difference in Keeler's and AIG's estimate of the total potential value of the class overtime claims. However, the court concluded class counsel was reasonable in discounting the settlement amount based on the applicable risks of litigation. The court rejected appellants' argument that the release was overbroad, but required that the release language be modified to correct confusion the parties conceded existed. The hearing on the final approval application and attorneys' fees was continued.
In June 2010, the parties and appellants filed a joint statement and declarations from the parties' counsel. The parties modified the settlement agreement's release, in part to clarify that it would extend only to claims covered through the entry of an order of final approval of the settlement agreement, not through the date of final resolution of any appeals. Class counsel provided several pages of analysis of the risk Keeler might not prevail on the claim that AIG misclassified the claims adjusters, and that she might not receive class certification. In the analysis, class counsel discussed the Harris case under review by the California Supreme Court, the federal case in which the court found Keeler's same position exempt, and the results of a recent superior court trial involving workers' compensation claims adjusters. Class counsel also responded to appellants' reliance on Bell v. Farmers Ins. Exchange (2001) 87 Cal.App.4th 805, providing a detailed explanation why the case was not as helpful to Keeler as appellants claimed. Similarly, regarding class certification, class counsel explained his concerns about winning certification, based on quoted portions of Keeler's deposition testimony suggesting her job duties varied, and the difficulty of winning an appellate reversal of a trial court denial of certification. AIG's counsel also provided a several-page analysis of the law, from the defense perspective.
Counsel for both sides explained the difference in their previous calculations of the total potential overtime damages for the class. Both sides explained how they arrived at their estimate of the maximum value of each of the claims. Their explanations included that the calculations regarding overtime-based claims involved an average of 2.17 hours of overtime per workweek, 31,757.73 workweeks, and an average hourly rate of $27.70. AIG's counsel explained in a sworn declaration:
"In its calculations, Defendant utilized an hourly rate of $27.70 and multiplied it by 1.5 for an overtime rate of $41.55. This hourly rate ($27.70) is a weighted average of hourly rates calculated by year, using actual salary amounts for workers compensation Claim Representatives and Senior Claim Representatives from July 2004 through June 2009. ThoseClass counsel declared he used defendant's numbers, rounded, of 32,000 workweeks and an overtime wage rate of $42. Class counsel estimated the total, undiscounted value of all of the claims at over $5 million. AIG's counsel estimated the total undiscounted value of the claims at over $4 million. Counsel for both parties explained the relevant legal principles affecting their numbers.
individual hourly rates were conservatively calculated by dividing annual salary by 2,000 hours (i.e., 40 hours per week for 50 weeks). The final class count (345 individuals) differs slightly from the class count of 339 individuals prior to mediation in this case. Defendant's overtime calculation for the final class count was based on three numbers: (i) the average (mean) hourly rate of $27.70 x 1.5 = $41.55; (ii) the average overtime numbers of 2.17 hours per week (which is based on sworn declarations submitted from 109 of the 345 class members); and (iii) the number of weeks worked by class members between 8/1/04 and 1/15/10: 31,757.73. Not all 345 class members were employed at the same time so the math is not class members x 52 weeks x years."
Appellants continued to object that the settlement was unreasonable, and that the parties failed to provide data that would support their calculations.
On June 18, 2010, the trial court granted tentative final approval of the settlement. The court found the settlement fair, reasonable, and adequate. With respect to the evidence produced, the court explained: "The parties have explained the source from which they obtained their data and the corresponding calculations. [¶] My view is that the objectors have not shown that this information is either unreliable, or inadmissible, or not entitled to the weight that this court now puts on it. Clark does not require the trial court to behave as though it were actually trying the case." The court acknowledged the risks of litigation, noting Keeler "had settlement authority of $150,000 on each file. She decided whether claims would be accepted, denied, or delayed. She determined the best way to settle cases. She negotiated with attorneys on claims. She worked with the company's defense counsel."
The court distinguished some of the cases upon which appellants relied. It further noted, "in a number of these cases, class certification has been denied. . . . [¶] The evidence from the employees is that very few of them worked overtime. [¶] . . . [¶] Everybody agrees that the objectors' arguments have at least some validity. The question is one of degree. My view is that there are significant risks in the question of class certification." The court then reviewed the parties' calculations and concluded:
"If you put all these figures together, the total maximum potential damages would be between $4,136,000 and $5,135,000. [¶] So my view is that the objectors' arguments have been persuasively countered and refuted by the parties, and I would find the settlement to be fair, adequate, and reasonable at this time. It seems to me that the parties have sufficiently explained things. The settlement provides the class members with a net payment of $918,000 including all these adjustments or -- are granted in full. This is between 18 and 22 percent of the total possible value of the class claims. [¶] The parties have shown that there are substantial risks to getting class certification and to winning on the merits. Settlement of about 1/5 of the total possible recovery is not unreasonable."
However, before granting final approval, the court required Keeler to explain with precision and specificity how class counsel evaluated the meal period claim. Keeler's counsel filed a declaration explaining his analysis. The declaration quoted from Keeler's deposition testimony and indicated counsel had also read the 109 declarations from other class members. Counsel described the declarations as "uniformly favorable" to AIG on the subject of meal periods.
In July 2010, the court granted final approval of the settlement and dismissed the case. Appellants timely appealed.
DISCUSSION
Appellants contend: (1) the trial court should have required the parties to produce the primary evidence and data they relied upon in asserting the settlement was reasonable; (2) the settlement is unfair because the release of claims extends past the mediation date; and (3) the release of claims is improper and unfair because it purports to release class members' claims under the FLSA. We conclude the trial court did not abuse its discretion in approving the settlement.
I. Applicable Legal Principles
In Munoz v. BCI Coca-Cola Bottling Co. of Los Angeles (2010) 186 Cal.App.4th 399, this court recently explained the legal principles governing appellate review of the trial court's approval of a class action settlement. That review is "limited in scope. We make no independent determination whether the settlement terms are 'fair, adequate and reasonable,' but only determine whether the trial court acted within its discretion. (Kullar, supra, 168 Cal.App.4th at pp. 127-128.) The trial court's discretion is broad, and is to be exercised through the application of several well-recognized factors. (Clark, supra, 175 Cal.App.4th at p. 799.) The list, which ' "is not exhaustive and should be tailored to each case," ' includes ' "the strength of plaintiffs' case, the risk, expense, complexity and likely duration of further litigation, the risk of maintaining class action status through trial, the amount offered in settlement, the extent of discovery completed and the stage of the proceedings, the experience and views of counsel, the presence of a governmental participant, and the reaction of the class members to the proposed settlement." ' (Kullar, at p. 128, quoting Dunk v. Ford Motor Co. (1996) 48 Cal.App.4th 1794, 1801 (Dunk).) ' " 'The most important factor is the strength of the case for plaintiffs on the merits, balanced against the amount offered in settlement.' " ' (Kullar, supra, 168 Cal.App.4th at p. 130.) While the court ' "must stop short of the detailed and thorough investigation that it would undertake if it were actually trying the case," ' it ' "must eschew any rubber stamp approval in favor of an independent evaluation." ' (Ibid.)" (Munoz, supra, at pp. 407-408.)
"Some cases state that a presumption of fairness exists 'where: (1) the settlement is reached through arm's-length bargaining; (2) investigation and discovery are sufficient to allow counsel and the court to act intelligently; (3) counsel is experienced in similar litigation; and (4) the percentage of objectors is small.' (Dunk, supra, 48 Cal.App.4th at p. 1802.) Kullar emphasizes that this is only an initial presumption; a trial court's approval of a class action settlement will be vacated if the court 'is not provided with basic information about the nature and magnitude of the claims in question and the basis for concluding that the consideration being paid for the release of those claims represents a reasonable compromise.' (Kullar, supra, 168 Cal.App.4th at pp. 130, 133.) In short, the trial court may not determine the adequacy of a class action settlement 'without independently satisfying itself that the consideration being received for the release of the class members' claims is reasonable in light of the strengths and weaknesses of the claims and the risks of the particular litigation.' (Id. at p. 129.)" (Munoz, supra, 186 Cal.App.4th at p. 408.)
II. The Trial Court Had Sufficient Information to Independently Satisfy Itself that the Settlement was Fair, Adequate, and Reasonable
Appellants do not argue there was a lack of arm's-length bargaining, counsel was inexperienced, or that a large percentage of class members objected. Instead, appellants contend that under Kullar, the parties should have provided the court with the discovery—actual documents or other primary evidence—upon which they relied in evaluating the case. In our view, Kullar does not stand for the proposition that the parties must give the court such primary evidence in every case. We further conclude that here, the information provided to the court was sufficient for it to make an informed, independent decision about the settlement's fairness, adequacy, and reasonableness.
Kullar concerned the settlement of a class action brought on behalf of certain Foot Locker Retail, Inc. (Foot Locker) employees. (Kullar, supra, 168 Cal.App.4th at p. 121.) Prior to settling the case, the plaintiffs propounded discovery, but Foot Locker's responses consisted mostly of objections. None of the discovery was directed to one of the claims at issue (meal breaks) or to allegations included only in an amended complaint. Foot Locker deposed the named plaintiff, but the plaintiffs took no depositions. (Id. at p. 122.) A stipulation of settlement filed with the court indicated plaintiffs' counsel had inspected and analyzed documents and data provided by Foot Locker, interviewed material witnesses and researched the relevant claims. However, the stipulation offered no specifics about what documents or data were produced or who was interviewed, and did not include a declaration or legal memorandum that provided additional details. (Id. at p. 124, fn. 2.) No time records were produced in discovery. The parties did not give the court "any estimated quantification of the number of one- hour-pay penalties that might be due or any explanation of the factors that were considered in discounting the potential recovery for purposes of settlement." (Id. at pp. 128-129.)
One class member objected to the settlement, arguing plaintiffs' counsel had not conducted sufficient discovery or investigation to determine the extent of the class loss. (Kullar, supra, 168 Cal.App.4th at p. 125.) Despite this objection and the objector's request for discovery, the court did not require plaintiffs to produce any additional information. Class counsel represented the settlement would provide class members 30 cents for every hour worked, compared to less than $1 for every hour worked if the case were litigated and plaintiffs prevailed on every issue. (Id. at p. 126.) At the hearing on final approval of the settlement, the trial court implicitly agreed the record did not contain evidence to support class counsel's representation. (Ibid.)
On this record, the trial court could not properly evaluate the settlement. Although class counsel indicated the parties had exchanged information informally and during the mediation, their declarations provided no details of what was exchanged. The appellate court found "there was nothing before the court to establish the sufficiency of class counsel's investigation other than their assurance that they had seen what they needed to see. The record fails to establish in any meaningful way what investigation counsel conducted or what information they reviewed on which they based their assessment of the strength of the class members' claims, much less does the record contain information sufficient for the court to intelligently evaluate the adequacy of the settlement. Assuming that there is a 'presumption' such as Dunk asserts, its invocation is not justified by the present record." (Kullar, supra, 168 Cal.App.4th at p. 129.)
The Kullar court compared the record in that case to those of Dunk and 7-Eleven Owners for Fair Franchising v. Southland Corp. (2000) 85 Cal.App.4th 1135. In both cases, the record before the trial court was voluminous. (Kullar, supra, 168 Cal.App.4th at p. 130.) In 7-Eleven, the settlement followed four and a half years of litigation and exhaustive discovery, and the trial court conducted three daylong evidentiary hearings to evaluate the settlement. (Kullar, at pp. 130-131.) But while the Kullar court referenced those two cases as examples in which the trial court had a proper basis to approve a settlement, it did not hold that such exhaustive records are a prerequisite to settlement approval. Instead, the Kullar court explained the trial court must "receive and consider enough information about the nature and magnitude of the claims being settled, as well as the impediments to recovery, to make an independent assessment of the reasonableness of the terms to which the parties have agreed. We do not suggest that the court should attempt to decide the merits of the case or to substitute its evaluation of the most appropriate settlement for that of the attorneys." (Kullar, at p. 133.)
Similarly, in Munoz, the record before the trial court included copies of the discovery that was produced in an earlier, similar class action, and formed the basis of counsel's evaluation of the case. (Munoz, supra, 186 Cal.App.4th at p. 405.) Although we affirmed the trial court's approval of the settlement and concluded the record before the trial court was sufficient, we did not consider whether production of actual discovery or other primary evidence is required to enable the trial court to properly evaluate a class action settlement. Nor did we suggest that a record without such evidence is necessarily insufficient.
Thus, Kullar instructs that the parties must provide "a meaningful and substantiated explanation of the manner in which the factual and legal issues have been evaluated." (Kullar, supra, 168 Cal.App.4th at pp. 132-133.) The court must have "basic information about the nature and magnitude of the claims in question and the basis for concluding that the consideration being paid for the release of those claims represents a reasonable compromise." (Id. at p. 133.)
The trial court had such information in this case. Counsel for both sides described in detail what AIG produced in formal and informal exchanges of information and documents. At class counsel's demand, the parties collaborated on a telephone survey of a sample of the class, conducted by a third party. Class counsel received over 3,000 pages of class member payroll records and information about the class members' job duties. Class counsel also reviewed declarations from 109 class members in which they estimated how much overtime they had worked per week, indicated whether meal breaks were made available to them, and reported whether they took regular breaks. AIG also produced composite numbers, such as median rates of compensation and the total number of workweeks for class members during the relevant period.
The parties did not submit the above documents to the court. However, they provided detailed analyses of the value of the class claims, based on the information included in those documents, accompanied by a detailed legal analysis and explanation of the relevant legal landscape. This was the kind of meaningful and substantiated explanation of the manner in which the factual and legal issues were evaluated that was missing in Kullar and in Clark. Although appellants disagreed with class counsel's assessment of the strength of the claims, that assessment was supported by legal citations and analysis the trial court could, and did, evaluate on its own to judge its reasonableness.
In Clark, this court found the trial court abused its discretion in approving a class action settlement where class counsel's valuation of the class claims was based on an apparent error in his understanding of the relevant law. We concluded "the trial court is obliged, at a minimum, to determine whether a legitimate controversy exists on a legal point, if that legal point significantly affects the valuation of the case for settlement purposes. Here, the trial court simply accepted class counsel's conclusion the overtime claim had 'absolutely no' value, without a 'substantiated explanation' of the manner in which a core legal issue was evaluated. [Citation.] The court thus lacked a sufficient basis to 'satisfy itself that the class settlement is within the "ballpark" of reasonableness' [citation], and therefore abused its discretion in approving the settlement." (Clark, supra, 175 Cal.App.4th at p. 803.) Moreover, in Clark, at oral argument counsel acknowledged the factual bases for the settlement were not fully developed. (Id. at pp. 803-804.) In contrast, here counsel provided extensive analysis of the relevant legal issues presented in the case. Further, the trial court did not merely accept class counsel's legal conclusions, but undertook its own review and analysis of the applicable law and precedents.
The trial court also could and did query the validity of counsel's calculations of the amount in controversy. The parties did not give the court the raw data or underlying documents that would have to be analyzed to independently arrive at the total number of relevant workweeks or the weighted mean wage rate the parties employed in their calculations. However, class counsel explained that AIG provided this statistical information for the mediation, and AIG's counsel explained, at least roughly, how the numbers were calculated. In the case of the average weekly overtime for the class, both sides were transparent in their discussion of how they arrived at the 2 or 2.17 number, and indicated it was derived from the 109 declarations from class members. The trial court reviewed the calculations and their stated bases at length.
This information gave the court an understanding of the nature and extent of class counsel's investigation. With that understanding, the court could also reasonably evaluate the validity of class counsel's valuation of the class claims, without taking steps tantamount to trying the case itself. Assuming the trial court satisfied itself that class counsel's valuations were reasonable, it had sufficient information to understand the total amount in controversy. (Munoz, supra, 186 Cal.App.4th at p. 409; Kullar, supra, 168 Cal.App.4th at p. 120.) Absent an indication that the parties' counsel's declarations could not be believed, or that the parties were inaccurate or insufficiently thorough in their assessment of the value of the claims, it was not necessary for the trial court to review raw data and primary documents to determine whether the settlement was adequate, fair, and reasonable.
Appellants assert statements in their declarations about the overtime they worked were sufficient to call into question the reliability and accuracy of the parties' counsel's declarations and investigation. However, the parties acknowledged some class members worked more than the average two hours of overtime. Class counsel still concluded that, based on the data and documents he reviewed, appellants, and even Keeler, were above average rather than the norm. The trial court could have questioned class counsel's conclusion and demanded more data to support it. But it was not an abuse of discretion for the court to accept the parties' summary of 109 employee declarations and the results of a telephone survey, rather than appellants' assertions that the two-hour figure was egregiously inaccurate.
The parties presented the trial court with a sufficient factual and legal record for it to evaluate the adequacy of the settlement. (Munoz, supra, 186 Cal.App.4th at pp. 410-411.) On the record presented, the trial court could independently and objectively analyze the evidence and circumstances to determine if the settlement was in the best interests of the class. (Kullar, supra, 168 Cal.App.4th at p. 130.) Given the information before the trial court, it was not necessary for it to also review the underlying documents and data that were summarized and described by the parties. The trial court did not abuse its discretion in approving the settlement based on the factual and legal record presented. III. The End Date of the Release Did Not Render the Settlement Per Se Unreasonable
Appellants further contend the settlement was unfair because it released claims extending beyond the date a settlement was reached at the mediation. As we understand their argument, appellants assert the settlement amount could only be deemed to compensate class members for claims accrued up to the point of the resolution of the case at the mediation. Thus, appellants argue, although the settlement will not pay class members for claims accruing after the date of the mediation, they will release any claims accrued in the months after the mediation and before final approval of the settlement.
Appellants' argument is based on an assumption that in arriving at a settlement number, the parties only considered workweeks from August 1, 2004, to April 19, 2009. They argue the class will not be compensated for the more than one year of potential claims that accrued between April 19, 2009, and July 14, 2010. The record does not support appellants' claim that while negotiating the settlement, the parties considered only claims accruing between August 1, 2004, and April 19, 2009. Appellants base this assertion on one AIG submission to the trial court, in which AIG's counsel declared that before the mediation it produced to Keeler the "[t]otal number of workweeks for workers' compensation Claims Representatives and Senior Claims Representatives from 8/1/04 to 4/19/09."
The parties never suggested that their valuation of the class claims contemplated only potential claims accrued between August 2004 and April 2009. Simply because AIG produced data relevant to that date range does not mean the claims considered in settlement negotiations were limited to that period, particularly since all of the parties participating in the mediation would have understood that additional claims would necessarily be included in the settlement. The settlement agreement itself makes this clear, both in contemplating the weeks for which class members would receive payment, and in the release. In any event, what was considered at the mediation relates only to how the ultimate settlement number was derived. Whatever the method, a more important question for the trial court was how much value that settlement number would provide to the class for the claims they would release: claims between 2004 and 2010. The parties' calculations of the value of the claims addressed this question for the period of August 2004 through mid-January 2010.
The trial court did not abuse its discretion in rejecting appellants' arguments about the end date of the release. Class counsel and counsel for AIG framed their discussion of the maximum value of the claims around a number of workweeks that stopped at January 2010, the date of preliminary approval of the settlement. But the settlement agreement negotiated as a result of the mediation, and the settlement number agreed upon at the mediation, always included a release of claims up to the date of final approval of the settlement. The trial court was presented with the settlement agreement at the beginning of the settlement approval process. The court read the terms of the agreement into the record, including the release. Appellants made the trial court aware of the "additional" released claims well before the court granted final approval of the settlement. The trial court understood that claims accrued between the date of preliminary approval and final approval would be released, even though the parties' calculations of the maximum value of the claims did not monetize those "additional" claims.
Indeed, the trial court explicitly considered the release of these "additional" claims in deciding whether the settlement was fair, adequate, and reasonable. We have no reason to second guess the trial court's exercise of its discretion in this regard. (See Villacres v. ABM Industries Inc. (2010) 189 Cal.App.4th 562, 586 (Villacres)[defendants may negotiate release of all claims up to the date of settlement even though the date naturally falls after the date the complaint was filed; no rigid rule prohibits such releases so long as proper notice and opportunity to opt out is provided and the settlement fairly and adequately provides for the new claims].)
Appellants' argument is essentially a contention that the settlement is worth even less to class members than the parties told the court. But we have already concluded the trial court had sufficient information to make an independent and informed decision on whether the settlement was fair to the class. It is clear the court's determination in this case included an understanding that class members would release covered claims accrued between preliminary and final approval of the settlement, even though those claims were not expressly monetized. As explained in Dunk, "[d]ue regard should be given to what is otherwise a private consensual agreement between the parties. The [trial court's] inquiry 'must be limited to the extent necessary to reach a reasoned judgment that the agreement is not the product of fraud or overreaching by, or collusion between, the negotiating parties, and that the settlement, taken as a whole, is fair, reasonable and adequate to all concerned.' [Citation.] 'Ultimately, the [trial] court's determination is nothing more than "an amalgam of delicate balancing, gross approximations and rough justice." [Citation.]' [Citation.]" (Dunk, supra, 48 Cal.App.4th at p. 1801.) In turn, "[o]ur task is limited to a review of the trial court's approval for a clear abuse of discretion. [Citations.] We will not 'substitute our notions of fairness for those of the [trial court] and the parties to the agreement. [Citations.]' [Citation.]" (Id. at p. 1802.) We find no abuse of discretion in the court's approval of the settlement, including the release of claims through July 14, 2010.
IV. The Inclusion of Unpled FLSA Claims in the Release Did Not Render the Settlement Per Se Unreasonable
Finally, appellants contend the trial court should not have approved the settlement because the settlement agreement purports to release the class members' FLSA claims. We conclude the trial court did not abuse its discretion in approving the settlement with the release as drafted.
Appellants' argument is based on statutory limitations on FLSA actions. Under title 29 of the United States Code section 216(b) (Section 216(b)), FLSA claims may not be prosecuted as a typical class action. In a typical class action, as under Code of Civil Procedure section 382, or rule 23 of the Federal Rules of Civil Procedure (28 U.S.C) (FRCP 23), any person deemed a class member in the action will be bound by the judgment unless he or she opts out. (Haro v. City of Rosemead (2009) 174 Cal.App.4th 1067, 1071, 1076 (Haro); Cal. Rules of Court, rule 3.766.) But under the FLSA, " 'no person can become a party plaintiff and no person will be bound by or may benefit from judgment unless he has affirmatively "opted into" the class; that is, given his written, filed consent.' [Citation.]" (Haro, at p. 1071.) In Haro, this court held FLSA claims may not be brought as a class action under Code of Civil Procedure section 382 because of Section 216(b)'s opt-in requirement. (Haro, at p. 1077.) Appellants argue that because of this limitation on FLSA actions, it was improper for the release in this case to include FLSA claims, since the class members did not opt into the class, and instead only had the option to opt out.
Section 216(b) states in relevant part: "An action to recover the liability prescribed in either of the preceding sentences may be maintained against any employer (including a public agency) in any Federal or State court of competent jurisdiction by any one or more employees for and in behalf of himself or themselves and other employees similarly situated. No employee shall be a party plaintiff to any such action unless he gives his consent in writing to become such a party and such consent is filed in the court in which such action is brought."
Section 216(b)'s applicability is limited here because Keeler did not assert or plead claims under the FLSA. Her causes of action involved facts that could have formed the basis of an FLSA claim. But she did not plead such claims. Section 216(b) requires an employee's written consent before his FLSA claims are prosecuted on a collective or class basis. The provision says nothing about the rights of an employee whose FLSA claims are not litigated, but are implicated in a purely state-law based overtime action. In general, an unpled claim may be released in a class action settlement. As noted in Villacres, supra, 189 Cal.App.4th at page 586, " 'The weight of authority establishes that . . . a court may release not only those claims alleged in the complaint and before the court, but also claims which "could have been alleged by reason of or in connection with any matter or fact set forth or referred to in" the complaint. . . . And it has been held that even when the court does not have power to adjudicate a claim, it may still "approve release of that claim as a condition of settlement of [an] action [before it]." ' [Citation.]" Further, "[a] judgment pursuant to a class settlement can bar [subsequent] claims based on the allegations underlying the claims in the settled class action. This is true even though the precluded claim was not presented, and could not have been presented, in the class action itself.' [Citations.]" (Id. at p. 586.)
In In re Prudential Ins. Co. of America (3d Cir. 2001) 261 F.3d 355 (Prudential),a case relied upon in Villacres, the Third Circuit Court of Appeals noted other federal courts had adopted the above proposition. The court continued: "Admittedly, it 'may seem anomalous at first glance . . . that courts without jurisdiction to hear certain claims have the power to release those claims as part of a judgment.' [Citation.] However, we have endorsed the rule because it 'serves the important policy interest of judicial economy by permitting parties to enter into comprehensive settlements that "prevent relitigation of settled questions at the core of a class action." ' [Citation.]" (Prudential, at p. 366.)
Villacres concerned the release of unpled claims under the Private Attorneys General Act of 2004 (Lab. Code, §§ 2698-2699.5). (Villacres, supra, 189 Cal.App.4th at p. 569.) Prudential involved claims of alleged deceptive practices in life insurance sales. But the reasoning of these cases is applicable here. The trial court could not have adjudicated FLSA claims as part of a Code of Civil Procedure section 382 class action, along with Keeler's other claims. Yet, such FLSA claims would have been based on the same facts as Keeler's claims for overtime wage violations under the Labor Code. The trial court could approve a release that included those claims. (See Espenscheid v. DirectSat USA, LLC (W.D.Wis. 2010) 708 F.Supp.2d 781, 792-793 [construing Section 216(b) as a procedural mechanism for vindication of substantive rights provided by FLSA; res judicata that might result from "hybrid" FRCP 23 state law/FLSA collective action was permissible]; Kuncl v. International Business Machines Corp. (N.D.Okla. 2009) 660 F.Supp.2d 1246, 1254 [employee who did not opt into FLSA collective action, but did not opt out of simultaneous FRCP 23 state-law based class action, was barred by settlement-based res judicata from subsequently pursuing FLSA claims].)
On appeal, appellants' sole objection to the inclusion of FLSA claims in the release is that Section 216(b) prohibits the release. Appellants do not argue that the FLSA claims are otherwise improperly included in the release, because, for example, they are based on allegations different from those asserted in Keeler's complaint. Nor do appellants contend that the inclusion of the FLSA claims in the release so changed the value or tenor of the settlement that, because of a substantive aspect of the FLSA claims, the settlement was unfair, inadequate, or unreasonable.
The legal authorities appellants cite to support their argument are inapposite. Ballaris v. Wacker Siltronic Corp. (9th Cir. 2004) 370 F.3d 901, 906, footnote 9, simply states the proposition we have noted above, namely that a FLSA action must be brought as a "collective action," and employees who do not opt into the action by filing a written consent are not bound by a resulting judgment. Ballaris does not consider the propriety of releasing unpled FLSA claims in a state law overtime class action. For the same reason, EEOC v. Pan American World Airways, Inc. (9th Cir. 1990) 897 F.2d 1499, 1508, footnote 11, and the unpublished case Ferrell v. ConocoPhillips Pipe Line Co. (C.D.Cal., May 12, 2010, No. 5:09-cv-00431-RRP-OP) 2010 WL 1946896, are equally unhelpful to appellants' position. Appellants also cite Haro, but in that case we held only that a plaintiff may not bring FLSA claims as a class action under Code of Civil Procedure section 382. We did not consider whether unpled FLSA claims could properly be released in a class action settlement of Labor Code overtime claims.
Appellants contend the release is particularly unfair to them because they have filed a claim in federal court against AIG that includes claims under the FLSA. We do not agree. Appellants were not required to participate in the class in this case. They received a notice of the settlement. The notice clearly stated the settlement would resolve all wage and hour claims against AIG the class members had or could have asserted in the lawsuit, "as well as any substantially similar wage and hour claims, including federal wage and hour laws, through the date of the Court's final approval of this Settlement Agreement." In addition, the notice informed appellants the terms of the release would apply to class members who did not opt out. The notice further specified that the release would apply to claims, known or unknown, based on the claims alleged in the complaint, including FLSA claims. Class members were warned: "If you were employed in a Covered position and do not opt out from this settlement, you will be deemed to have entered into this release and to have released the above-described claims." Despite this notification, appellants did not opt out. Had they opted out of the class, they would not be bound by the settlement or resulting judgment and could pursue their FLSA claims in court without concern that the Keeler class settlement would bar the claims. (Villacres, supra, 189 Cal.App.4th at p. 587.) They chose not to do so.
Moreover, we are not persuaded by appellants' argument that the release contravenes Section 216(b)'s legislative intent. Several courts have explained that Section 216(b) was intended to "protect employers from facing 'financial ruin' and prevent employees from receiving 'windfall payments, including liquidated damages.' [Citations.]" (Harris v. Investor's Business Daily, Inc. (2006) 138 Cal.App.4th 28, 34, citing Hoffman-La Roche Inc. v. Sperling (1989) 493 U.S. 165, 173 [congressional intent behind FLSA opt-in procedure was to limit private plaintiffs due to an influx of litigation].) Here, class members will receive compensation for their overtime claims in a court-approved settlement. We fail to see how the approach appellants advocate with respect to the release would advance the congressional intent behind Section 216(b). (See Villacres, supra, 189 Cal.App.4th at pp. 576, 583-584; Kuncl, supra, 660 F.Supp.2d at pp. 1252-1254; Gardner v. Western Beef Properties, Inc. (E.D.N.Y., June 17, 2008, No. 07-CV-2345) 2008 WL 2446681, *2-3.)
DISPOSITION
The judgment is affirmed. Respondents shall recover their costs on appeal.
BIGELOW, P. J. We concur:
FLIER, J.
GRIMES, J.