Del Castillo v. Community Child Care Council of Santa Clara County, Inc.

Background

Mario Del Castillo, Puthea Cha, Michael Rasche, and Javier Cardoza asserted claims under the Employee Retirement Income Security Act of 1974 on behalf of themselves and others similarly situated. They alleged that Community Child Care Council of Santa Clara County, Inc. (“4Cs”), its board and trustees, its former executive director Alfredo Villasenor, and Life Insurance Company of the Southwest violated that law in handling two 4Cs employee pension plans. The alleged conduct included failing to keep required plan documents and purchasing restrictive annuity accounts that resulted in withdrawal and transfer fees.

The case went through three rounds of motions to dismiss. The court had dismissed the claims against Life Insurance Company of the Southwest with one additional opportunity to amend when the parties informed the court that they had reached a settlement. The court later granted preliminary approval of the settlement and ordered notice to the proposed class.

Settlement Terms and Notice

The settlement class consisted of all current and former participants and beneficiaries of the plans from October 1, 1987, through December 31, 2019, excluding the individual defendants. The settlement created a $317,500 fund. It provided for attorneys’ fees, settlement-administration expenses, attorney costs, reimbursement of withdrawal fees charged to class members who accessed funds in the Life Insurance Company of the Southwest annuities, and distributions to the remaining class members. Class members could receive a deposit into a retirement account or a direct payment. Any remaining amount under the agreement could be distributed in a second payment or, if less than $5,000 remained, to the East Bay Community Law Center.

The court found that the class met the requirements for settlement certification under Federal Rule of Civil Procedure 23. The class had 337 members, the claims involved common questions about whether the defendants violated the Employee Retirement Income Security Act, and the representatives’ claims were typical of the class claims. The court also found no conflict of interest and no failure by class counsel to litigate vigorously. It concluded that common questions predominated and that a class action was appropriate for settlement purposes.

Notice was mailed to 336 of the 337 class members, including 35 people who needed notice remailed to another address. No class member opted out or objected. The court concluded that the notice was adequate and that the settlement was fair, adequate, reasonable, and not the product of improper cooperation between the parties.

Rulings on Settlement and Fees

The court granted Plaintiffs’ Motion for Final Approval of Class Action Settlement. In applying the factors used to assess class settlements, the court considered the facial viability of the claims, the risks and likely expense of continued litigation, the monetary and nonmonetary benefits obtained, the stage of the case, counsel’s experience, and the class members’ response. The court viewed the settlement as substantial in light of the risks, although it represented about half of the plaintiffs’ claimed damages.

The court also granted Plaintiffs’ Motion for Attorneys’ Fees, Costs, and Class Representative Enhancement Payments. It approved $110,125 in attorneys’ fees, approximately 34.7 percent of the settlement fund, and $9,645.55 in costs. Although the requested percentage exceeded the usual 25 percent benchmark, the court found the amount reasonable because counsel’s lodestar was $327,691, the litigation had involved three rounds of motions to dismiss, counsel obtained monetary and nonmonetary benefits, and the case presented significant litigation risks.

The court found that the four class representatives had made substantial efforts benefiting the class, but it found the requested $5,000 payment for each representative excessive. It approved $2,500 for each of the four representatives, for a total of $10,000. It also approved the $10,000 settlement-administrator fee, which had increased after the estimated class size more than doubled from 145 to 337 members.

Order

Judge Beth Labson Freeman granted both motions. The court retained jurisdiction over implementation and enforcement of the settlement and required the parties to file a post-distribution accounting within 21 days after distributing the settlement funds and paying the approved awards, fees, and costs.