Philips v. Munchery Inc.

Background

Joshua James Eaton Philips and Christina Brooks brought this putative class action against their former employer, Munchery Inc., under the federal Worker Adjustment and Retraining Notification Act and California’s counterpart. They alleged that Munchery terminated employees in connection with a mass layoff or plant closing without providing 60 days’ written notice and without paying the required wages, benefits, and other compensation.

Munchery operated an online food-delivery service until it ceased operations on January 21, 2019. It later filed for Chapter 11 bankruptcy, which temporarily stayed this case. The parties negotiated with assistance from Bankruptcy Judge Roger Efremsky and reached a settlement in February 2020. The court previously denied preliminary approval without prejudice because of concerns about the settlement and notice. Plaintiffs then submitted additional declarations and revised notices.

Settlement Terms

The proposed settlement class consisted of people connected to Munchery’s facility at 200 Shaw Road in South San Francisco who were terminated without cause as part of, or in connection with, the January 21, 2019 mass layoff or plant closing, who qualified as affected employees under the federal WARN Act, and who did not timely opt out.

The gross settlement amount was $400,000. The proposed deductions included $5,000 payments to the class representatives, up to $126,666.67 in attorneys’ fees, up to $15,000 in expenses, and $30,622.61 for the employer’s share of payroll taxes. The remaining $222,710 would be distributed to class members on a pro rata basis. Settlement checks not deposited within 180 days would be transferred to California’s Unclaimed Property Fund in the class member’s name. The proposed release would cover claims against Munchery’s bankruptcy estate arising from the facts alleged in the complaint.

Conditional Class Certification

The court found that the proposed class met the requirements for certification under Federal Rule of Civil Procedure 23. It found approximately 270 class members, common legal and factual questions, typical claims by the named plaintiffs, and adequate representation by the plaintiffs and their counsel. The court also found that common questions predominated and that a class action was superior to individual lawsuits because the potential individual recovery was relatively small, Munchery was in bankruptcy, and class treatment would avoid duplicative litigation.

The court therefore provisionally certified the settlement class for settlement purposes only and appointed Jack Raisner, Rene Roupinian, and Gail Lin of Raiser Roupinian LLP as class counsel.

Preliminary Settlement Approval

The court evaluated whether the proposed settlement appeared potentially fair, adequate, and reasonable at the preliminary stage. The parties had participated in mediation and continued negotiations, and the settlement amount represented approximately 26 percent of the class’s asserted $1.49 million WARN claim. The court concluded that, given Munchery’s bankruptcy and limited assets, the $400,000 settlement appeared fair, reasonable, and adequate. It also found no obvious deficiency or improper preferential treatment at this stage.

The court approved the revised notice plan, which included mailed notice, efforts to locate updated addresses, website publication, and outreach to class members. Class members could opt out or object by January 11, 2021. The final approval hearing was scheduled for January 21, 2021.

Attorneys’ Fees and Costs

The court did not decide the amount of attorneys’ fees or costs. Class counsel indicated that they planned to seek one-third of the settlement, while the Ninth Circuit generally uses 25 percent of a common fund as a benchmark under the percentage-of-recovery method. The court required counsel to file a motion supported by declarations, detailed billing records, and an itemized summary of costs so the court could evaluate the requested amounts and give class members an opportunity to object.

Disposition

The court granted Plaintiffs’ renewed request for preliminary approval of the class action settlement. It provisionally certified the settlement class for settlement purposes only, approved the notice and related deadlines, appointed class counsel, required the fee-and-cost motion and final-approval motion, and set a final approval hearing. The order did not grant final approval of the settlement or award attorneys’ fees and costs.