Joh v. American Income Life Insurance Company

Background

The plaintiffs were former insurance salesperson trainees or agents of American Income Life Insurance Company who trained or worked in California. They alleged that trainees received no pay during training, that agents were hired as commission-only workers after being promised salaried positions, and that the company failed to pay minimum wages or overtime, provide meal and rest breaks, reimburse work expenses, provide accurate wage statements, and pay certain wages and commissions. They also challenged chargebacks and sought penalties under California’s Private Attorneys General Act.

The case was one of several similar cases against the company. The parties participated in mediation after the company moved to compel individual arbitration. They later proposed a class settlement. The settlement class included people who trained to become or worked as sales agents in California during the relevant four-year period, if their training or work began before preliminary approval.

Proposed settlement

The settlement required the company to pay $5,750,000. After deductions for administration costs, attorneys’ fees and litigation costs, service awards, and a payment to California’s Labor and Workforce Development Agency, the remaining money would be distributed to class members based primarily on their workweeks. Certain trainees would receive a presumption of one or four training workweeks, with those weeks counted twice. The settlement also released claims brought in this case or reasonably arising from the facts alleged in it.

Court’s analysis

For final approval, the court had to determine whether the class met Federal Rule of Civil Procedure 23 and whether the settlement was fair, reasonable, and adequate. The court found that the approximately 6,500-member class was sufficiently numerous, had common legal and factual questions, and was represented adequately by the named plaintiffs and their counsel. It also found that common issues predominated and that a class action was the superior method for resolving the dispute.

The court found that the notice process was adequate. Notice was mailed to 6,980 class members after records without physical addresses were removed, updated addresses were located for some returned notices, email notice was sent to 6,886 members for whom email addresses were available, and a settlement website was provided.

The court also found that the parties negotiated at arm’s length with the assistance of an experienced mediator. It rejected Golz’s argument that the settlement resulted from a “reverse auction,” meaning that a defendant allegedly chooses weaker class counsel to obtain a settlement that blocks other claims. The court noted that Golz’s separate case had been reduced to a claim that did not permit monetary damages, while this case included a claim under California’s Private Attorneys General Act.

Reason for denial

The court agreed with Golz’s objection that the settlement did not treat trainees equitably compared with agents. The court noted that waiting-time penalties made up approximately $15.7 million of the plaintiffs’ estimated $31.3 million maximum liability. About 1,486 trainees represented nearly 25% of the former workers who might receive those penalties, but the workweek-based formula would presumptively give them only about 2% of the settlement value attributed to waiting-time claims. The court also observed that trainees’ claims were described by the plaintiffs’ counsel as easier to prove and more valuable than many agent claims.

The court concluded that double-counting trainees’ presumed workweeks did not correct the disparity. Because the proposed formula would give agents nearly all of the settlement’s value even though trainees’ claims made up a substantially larger share of the estimated liability, the arrangement was not equitable and fair.

Disposition

The court denied the Plaintiffs’ Motion for Final Approval of Class Action Settlement and Attorneys’ Fees, Costs, and Service Awards. The opinion did not add a “with prejudice” or “without prejudice” qualification to that denial.