Johnson v. Serenity Transportation, Inc.

Background

The plaintiffs, who were mortuary drivers, sued Serenity Transportation, Inc., David Friedel, Service Corporation International, and SCI California Funeral Services, Inc. They alleged that they had been misclassified as independent contractors and were therefore denied employment rights and benefits under California law. The alleged losses included unreimbursed business expenses, overtime wages, meal- and rest-period premiums, and statutory penalties. The operative complaint also included a claim under the Fair Labor Standards Act.

The court certified a class for all claims against the Serenity Defendants, but denied certification for the claims against the SCI Defendants. After the Ninth Circuit affirmed the class-certification order, the parties resumed settlement discussions. They participated in settlement conferences, and the Serenity Defendants provided financial information. The court noted evidence that Serenity had not operated for almost two years, its liabilities substantially exceeded its assets, it had no cash on hand, and it had numerous debts and liens.

Proposed Settlement

The certified class consists of all people who worked as independent-contractor-classified drivers for Serenity Transportation from January 1, 2011, through January 1, 2019.

Under the proposed agreement, Friedel would pay $10,000 to class counsel to hold in a trust account. After final approval, the money would be distributed under the agreement. Before payments to class members, the fund could be used for a $250 service award to Gary Johnson, a $250 service award to Curtis Johnson, and mailing or other administration costs, all subject to court approval. Class counsel requested no attorneys’ fees or litigation-cost reimbursement, and the proposal did not use a settlement administrator.

The remaining fund would be divided among class members in proportion to the number of weeks they worked. The defendants had to provide class-member contact information and work dates, after which class counsel would mail the settlement notice. Class members who did not opt out would release claims concerning contractor misclassification, unpaid overtime, unreimbursed business expenses, and related statutory penalties under the California Labor Code, California wage orders, and the Fair Labor Standards Act. For class members who had not previously joined the Fair Labor Standards Act collective action, those claims would be released only when the person endorsed the settlement check, with the signature serving as consent to join those claims and accept the settlement.

Uncashed checks would become void after 90 days, and remaining funds would be paid to the East Bay Community Law Center as a charitable distribution. Class members could opt out by mailing a letter containing specified information, including a Social Security number or employer identification number, and could object within 45 days after the notice was mailed.

Court’s Analysis

Under Federal Rule of Civil Procedure 23(e)(2), a class settlement must be fair, adequate, and reasonable. At the preliminary-approval stage, the court asks whether the settlement appears potentially fair, resulted from serious and informed negotiations, has no obvious deficiencies, avoids improper preferential treatment, and falls within the possible range of approval. A full fairness review occurs at the final-approval stage.

The court found that the parties had sufficiently investigated the facts and that the settlement was reached through extensive litigation and settlement conferences. Given the Serenity Defendants’ financial insolvency, the court concluded that the $10,000 settlement was reasonable in light of the alternative possibility of no recovery. The court found no obvious deficiencies and concluded that the proposed $250 service awards did not show improper preferential treatment, considering the representatives’ participation and the modest settlement fund.

The court also found that the proposed notice generally explained the case, class definition, claims, rights to opt out or object, and binding effect of a class judgment. The absence of a settlement administrator did not prevent preliminary approval because the settlement fund was modest, the class was small, and the defendants had address records.

Required Modifications and Ruling

Before distributing the notice, the plaintiffs had to modify it to comply with the Northern District of California’s procedural guidance. The notice had to direct written objections only to the court, clearly state that the court could approve or deny the settlement but could not change its terms, and provide additional information about the proposed charitable distribution to the East Bay Community Law Center, including the organization’s relationship to the lawsuit and any relationship with the class or class counsel.

The court vacated the July 22, 2021 hearing and granted the plaintiffs’ motion for preliminary approval of the class action settlement. It ordered the defendants to provide class-member information within 10 days, required class counsel to mail the modified notice within 21 days, required the plaintiffs to file a motion for final settlement approval by November 22, 2021, and scheduled a final-approval hearing for January 6, 2022. Judge Jacqueline Scott Corley signed the order. The ruling was preliminary approval, not final approval.