Philips v. Munchery Inc.

Background

Joshua James Eaton Philips and Christina Brooks brought a proposed class action against their former employer, Munchery Inc., under the federal Worker Adjustment and Retraining Notification Act and California’s counterpart law. They alleged that Munchery failed to give employees 60 days’ written notice before a mass layoff and failed to pay wages and benefits required by those laws.

Munchery ceased operations on January 21, 2019 and later filed for Chapter 11 bankruptcy. The bankruptcy filing temporarily stayed this case. After negotiations involving a bankruptcy judge and other participants in the bankruptcy proceeding, the parties reached a settlement in February 2020.

Settlement Class and Notice

The settlement class consisted of 268 people who met the agreement’s requirements concerning their work for Munchery, termination without cause, and the January 2019 mass layoff or plant closing. The settlement provided for a gross payment of $400,000. The agreement called for deductions of up to $126,666.67 in attorneys’ fees, up to $15,000 in expenses, $30,622.61 for the employer’s share of payroll taxes, and $5,000 in representative payments. The remaining $222,710 was to be distributed to class members on a proportional basis.

The settlement administrator mailed notice to all 268 class members. Twelve notices were initially returned as undeliverable; updated addresses were found for seven people, and the notices were remailed successfully. Notice was also posted on a case website. The deadline to object or opt out passed without any objections or opt-outs.

Final Class Certification

The court found that the class met Federal Rule of Civil Procedure 23’s requirements for final certification. Those requirements included sufficient size, common legal or factual questions, claims typical of the class, adequate representation, predominance of common questions, and superiority of the class-action procedure. The court also found that the notice adequately explained the claims, settlement, distribution, and options to object or opt out.

Final Settlement Approval

Under Rule 23(e), a class settlement must be fair, adequate, and reasonable. The court considered the strength and risks of the claims, the risks of maintaining class certification, the settlement amount, the parties’ investigation and negotiations, counsel’s experience, and the class members’ response.

The court noted that Plaintiffs valued the claims at $1.49 million, but Munchery’s bankruptcy limited the funds available to unsecured creditors. Munchery also asserted defenses based on the federal law’s exceptions for a faltering company and unforeseen business circumstances. The court concluded that the settlement gave class members a certain recovery despite those risks and approved the settlement.

Because the settlement was reached before final class certification, the court also examined whether the agreement showed signs of collusion. Two warning signs were present: the requested fees equaled one-third of the settlement fund, and the agreement contained a provision under which Munchery did not oppose the fee request. The court nevertheless found no collusion, concluding that the agreement resulted from arms-length negotiations and reflected Munchery’s financial condition. The agreement did not allow unawarded fees to return to Munchery.

Fees, Costs, and Representative Payments

The court granted Plaintiffs’ request for $126,666.67 in attorneys’ fees. It found that the amount—30 percent of the settlement’s monetary value—was reasonable under the circumstances, including counsel’s work in both the district court and bankruptcy court, the risks of representing the class on a contingency basis, counsel’s experience, and the fact that the request was substantially below counsel’s calculated lodestar of $324,551.50.

The court also awarded $14,591.07 in costs, including settlement-administration and notice expenses. It approved a $2,500 incentive award for each class representative, despite noting that the representatives had not submitted individual declarations describing their contributions, because the requested amount was reasonable on its face.

Disposition

Judge Corley granted Plaintiffs’ motion for final approval of the class settlement. She also granted Plaintiffs’ motion for attorneys’ fees and costs and awarded $126,666.67 in fees, $14,591.07 in costs, and $2,500 for each class representative. The Clerk was directed to close the case.