Monplaisir v. Integrated Tech Group, LLC

Background

This wage-and-hour collective and proposed class action involved employees of Integrated Tech Group, LLC and ITG Communications LLC, referred to collectively as ITG. The complaint alleged violations of federal and California law involving minimum wages, overtime, meal and rest breaks, expense reimbursement, and wage statements.

A prior order compelled many plaintiffs to arbitrate their claims and appeared to reduce the federal collective from nearly 380 members to 132. Plaintiffs later sought certification of a California class, but the parties had not determined the class’s size or how many potential members were subject to arbitration. The court ordered discovery on those issues. Before that discovery was completed, the parties reached a proposed settlement.

The parties sought preliminary approval for a settlement covering a 378-member federal wage collective and a 284-member proposed California class. ITG did not oppose certification for purposes of considering the settlement. The proposed settlement provided a non-reversionary payment of $1,625,000 to class and collective members, with separate amounts for the settlement administrator, the California Labor and Workforce Development Agency’s share of penalties, and a service award for named plaintiff Monplaisir. The proposed average payment was $2,545 per plaintiff, although the average differed between the federal collective and the California class.

Reasons for Denial

A court may preliminarily approve a class settlement only if the proposed relief appears fair, reasonable, and adequate. Judge Alsup identified several problems.

First, he found that the proposal unduly rewarded class counsel. Counsel agreed not to request more than $1,500,000 in fees, and ITG agreed not to oppose a fee request of up to $700,000 or costs of up to $150,000. The court treated these amounts as part of a total payment between $2,475,000 and $3,275,000. Counsel would therefore receive between 28% and 45% of that total, which the court described as extraordinary compared with the 25% benchmark used in the circuit. The court also found that the settlement paid plaintiffs between 23% and 30% of estimated potential recovery before fees, and about 15% after fees.

Second, the court concluded that the proposed recovery appeared to be based more on ITG’s successful effort to compel arbitration than on a rigorous evaluation of the merits of the employees’ claims. The court acknowledged that ITG had presented defenses, including evidence concerning minimum wages, incentive bonuses, overtime calculations, time tracking, travel time, meal and rest breaks, and premium pay. But counsel had not adequately explained how those defenses reduced the value of each claim or why a 15% recovery was fair.

Third, the court found that the settlement might unfairly require plaintiffs who were not bound by arbitration agreements to subsidize the settlement of claims belonging to plaintiffs who were subject to those agreements. The court also criticized the proposed installment payments because the parties supported them with vague statements about ITG’s financial condition rather than a sworn declaration and supporting materials.

Disposition

Judge Alsup denied preliminary approval of the proposed settlement. He stated that an amended proposal might be better justified, but the court’s role was to approve or deny the proposal rather than rewrite it. The court did not reach the question of conditional class certification and ordered the parties to submit the requested supplemental information about the number of potential class members by November 27 at 5:00 p.m.