Cipolla v. Team Enterprises, LLC

Background

This was a certified wage-and-hour class action involving part-time promotional specialists who worked for defendant marketing companies. The promotional specialists set up tables and advertised products at social events. The products were generally beers and spirits supplied by third-party clients of the defendant-employers.

The plaintiffs’ original complaint asserted claims under the federal Fair Labor Standards Act and the California Labor Code. They alleged that the defendants denied overtime and other wages, failed to provide meal and rest breaks, issued unlawful wage statements, failed to reimburse necessary business expenses, and failed to pay final wages promptly when employment ended.

The defendants moved to compel arbitration. The court initially found the arbitration agreement unconscionable and denied that motion, but the court of appeals later ruled that the agreement’s delegation clause required the arbitrator to decide its validity and enforceability. The district court then compelled arbitration and stayed the case. After nearly a year, the arbitrator also found the agreement unconscionable and unenforceable.

The plaintiffs later filed multiple amended complaints and motions for class certification, while the defendants filed motions to dismiss and for summary judgment. The court eventually certified three narrow issues: whether denying meal or rest breaks to specialists working two or more shifts in one day violated California law; whether time between events during such a day should count as work time; and whether specialists were entitled to reimbursement for putting the Brand Trend app on their phones. The plaintiffs abandoned the app-expense issue because its potential value was minimal.

The court denied an initial motion for preliminary settlement approval because the proposed release was too broad, the payment formula did not account for differences in claim strength, and the proposed attorney’s-fee distribution did not comply with the court’s standing orders. The plaintiffs submitted an amended settlement, which received preliminary approval in June 2024.

Settlement Terms

The amended settlement required the defendants to create a non-reversionary common fund of $500,000 for approximately 1,016 class members. The settlement released claims related to the certified issues: meal and rest breaks or time between events when a specialist worked two or more shifts in one day, and business expenses related to placing the Brand Trend app on a phone.

From the fund, $125,000 was allocated for attorney’s fees, $54,730 for litigation costs and expenses, $15,995 for settlement-administrator costs, and $1,500 for service awards. These deductions left $302,775 for the class. Of that amount, $100,000 was designated as a penalty under California’s Private Attorneys General Act, with $75,000 paid to the state labor agency and $25,000 distributed to employees covered by those claims. The remaining $202,775 was to be distributed to class members.

The settlement provided for pro-rata distributions. The court estimated that the highest individual payment would be about $5,000 and the average payment about $266, with differences based on the number of multiple-shift days each class member worked. More than 1,000 class members received notice, and none objected or opted out.

Court’s Analysis and Rulings

Under Federal Rule of Civil Procedure 23, a court may approve a class settlement only after a hearing and a finding that the settlement is fair, reasonable, and adequate. The court evaluated the settlement under the eight factors commonly used in the Ninth Circuit, the additional factors required by Rule 23, and factors identified in the court’s own prior notice.

The court found that the factors supported approval. It considered the plaintiffs’ litigation risks, the difficulties of maintaining class treatment, the expense and likely duration of further litigation, the amount offered, the extensive discovery, counsel’s experience, and the class members’ response. The court also found that the settlement was negotiated at arm’s length through a mediator, that class counsel and the representatives adequately represented the class, and that the payment method treated class members equitably.

The court separately found that the $100,000 Private Attorneys General Act settlement was meaningful and consistent with the statute’s public purpose. It approved the allocation of 75 percent of that penalty to the state labor agency and 25 percent to the affected employees.

Judge William Alsup granted the plaintiffs’ motion for final approval of the class settlement. The order states that the settlement was fair, reasonable, and adequate; resulted from good-faith, arm’s-length negotiations; complied with applicable law; and was consistent with public policy. The settlement provided for dismissal of the action with prejudice and release of claims related to the three certified issues.

Judge Alsup also granted counsel’s motion for attorney’s fees, costs, and service awards. He awarded $125,000 in attorney’s fees and $54,730 in litigation costs and expenses, all to be paid from the settlement fund. Counsel could receive the costs and 50 percent of the fee immediately; the remaining 50 percent could be recovered only after counsel certified that the fund was completely wound up. The court approved $15,995 in administrator costs and awarded Jamie Arias, Felicia Cipolla, and Alexis Wood $500 each. The court retained continuing jurisdiction over the settlement’s implementation, enforcement, construction, and interpretation for four years from entry of the order.