Uschold v. NSMG Shared Services, LLC

Background

William Uschold and Tyrone Dangerfield brought a California wage-and-hour class action against their employer, NSMG Shared Services, LLC. They alleged that NSMG’s commission payment system used weekly advances and “chargebacks” when employees did not meet sales quotas, resulting in unlawful deductions from earned commissions. They also alleged that NSMG failed to reimburse employees for necessary and reasonable business expenses, including use of personal vehicles and cell phones.

The original complaint asserted five California-law claims involving unlawful wage collection, unauthorized deductions, expense reimbursement, unpaid wages, and unfair business practices. The proposed first amended complaint added Tiana Naples and Jose Almendarez as named plaintiffs and asserted additional claims, including breach of contract, fraud, minimum-wage violations, meal- and rest-period violations, inaccurate wage statements, untimely wage payments, and a claim under California’s Private Attorneys General Act.

Settlement Class and Proposed Settlement

For settlement purposes, the proposed class included all employees paid commissions by NSMG from January 17, 2014, through the date of preliminary approval. The court found that the proposed class had at least 429 members and conditionally certified it for settlement purposes. The court concluded that the requirements for class certification were met, including sufficient numbers, common questions, typical claims, adequate representatives and counsel, predominance of common issues, and superiority of a class action over individual lawsuits.

NSMG agreed to pay a stated gross settlement amount of $2.2 million into a settlement fund. The proposed deductions included $33,000 for the state agency payment resolving the Private Attorneys General Act claim, settlement-administrator fees of up to $9,000, attorneys’ fees of up to $736,200, litigation costs of up to $20,000, service awards of $2,000 to each of the four named plaintiffs, and NSMG’s estimated share of payroll taxes. The court stated that, after excluding the employer’s payroll-tax obligation, the gross settlement amount for evaluating the recovery was $2,135,000.

The estimated net settlement amount was approximately $1,417,400. Payments to participating class members would be calculated pro rata according to the number of weeks each person worked in California during the class period. One-third of each payment would be treated as wages, one-third as interest, and one-third as penalties and other non-wage damages. Class members would have 60 days after the notice was mailed to dispute information, opt out, or object.

The agreement released claims asserted in the amended complaint, or that could have been asserted based on the same facts, during the settlement period. The named plaintiffs also agreed to broader releases relating to their employment with NSMG and other claims arising before the end of the settlement period.

Court’s Analysis

The court applied Federal Rule of Civil Procedure 23, which governs class actions, and considered whether the settlement was potentially fair, adequate, and reasonable at the preliminary-approval stage. The court found that the parties had conducted discovery, participated in two private mediations, and continued negotiations afterward. It concluded that the proposed agreement appeared to result from serious, informed, and non-collusive negotiations.

The court also found no obvious deficiency that prevented preliminary approval and concluded that the proposed $2,000 service awards did not presently show impermissible preferential treatment. The court noted, however, that final-approval materials should include evidence supporting those awards. The court considered the parties’ estimate that potential exposure was between $9 million and $11 million, the proposed recovery, and the risks and costs of continued litigation. It concluded that the settlement fell within the range of possible approval.

The court approved the notice plan but required an additional paragraph explaining how class members could review and object to class counsel’s request for attorneys’ fees and costs. The court also directed counsel to provide more information at final approval about the proposed recipients of unclaimed funds and whether such funds should instead be treated as unclaimed property under California law.

The court did not approve the requested attorneys’ fees or costs at this stage. It required class counsel to file a fee motion supported by declarations and detailed billing records so the court could evaluate the requested amount, which was up to $736,200, and to submit an itemized summary of costs of up to $20,000.

Disposition

The court GRANTED Plaintiffs’ amended, unopposed motion for preliminary approval of the class action settlement. It appointed Na’il Benjamin and Allyssa Villanueva of Benjamin Law Group, P.C. as class counsel for the settlement class, approved notice under the notice plan as modified by the order, required a motion for attorneys’ fees and costs by November 4, 2019, and required a motion for final settlement approval no later than 35 days before the final approval hearing. The parties were ordered to appear for a final approval hearing in February, although the supplied opinion text does not show the specific day.

Judge Jacquelyn Scott Corley’s order granted preliminary approval only; it did not grant final approval of the settlement or decide whether NSMG violated the wage-and-hour laws.