Sandoval Ortega v. AHO Enterprises, Inc.

Background

Ten named plaintiffs brought federal and California wage-and-hour claims against Aho Enterprises, Inc., doing business as Superior Body Shop, and Jack Aho, Issa Aho, and Hani Aho. The claims alleged failures to pay overtime and minimum wages, provide meal and rest periods, pay wages at termination, provide accurate wage statements, and comply with California’s unfair-competition and Private Attorneys General Act provisions. The plaintiffs pursued the case for themselves and a putative class of current and former non-exempt production employees.

In August 2020, the court granted in part and denied in part the plaintiffs’ motion for class certification. It certified an overtime-pay subclass, a rest-period subclass, two related subclasses concerning wage statements and termination payments, and a Fair Labor Standards Act collective action for certain employees who worked more than 40 hours per week. The parties later conducted written discovery, reviewed payroll and timekeeping records, and participated in mediation and a settlement conference before reaching an agreement in principle.

Proposed Settlement

The proposed settlement class included all non-exempt production employees, including technicians, technician helpers, detailers, painters, and painter helpers, who worked for the defendants in California at any time from January 23, 2015, through September 30, 2019. The defendants agreed to pay a total of $1,100,000 into a non-reversionary settlement fund. The agreement provided for deductions including class-representative payments of up to $7,500 each for the ten representatives, attorneys’ fees of up to one-third of the fund, litigation expenses of up to $12,000, estimated administration costs of $3,499, and up to $37,500 for the state agency payment resolving the Private Attorneys General Act claim.

The remaining amount—approximately $605,334—would be distributed to participating class members based on each person’s workweeks compared with the total workweeks of participating members. No claim form was required. The agreement provided for two distributions, with the final distribution to occur no later than 830 days after final approval. Participating class members would release claims alleged in the complaint and additional wage-and-hour claims based on the same alleged facts through the date of preliminary approval. Class members could opt out or object after receiving notice.

Court’s Analysis

Under Federal Rule of Civil Procedure 23, the court had to determine at the preliminary stage whether the proposed settlement fell within the range of possible final approval and appeared fair, reasonable, and adequate. The court considered the factors identified in Churchill Village, L.L.C. v. General Electric and Rule 23’s settlement requirements.

The court found that the risks and costs of continued litigation—including the possibility of a reduced recovery, delay, and the defendants’ potential bankruptcy—supported settlement. It found the monetary relief reasonable, noting that the proposed $1.1 million settlement represented approximately 40% of the damages calculation for the overtime and meal- and rest-break claims, excluding some additional amounts. The court also found that discovery was sufficient, class counsel and the representatives appeared adequate, and the negotiations appeared informed and non-collusive.

The court examined the proposed attorneys’ fees, including the agreement that the defendants would not oppose a request for up to one-third of the fund. Although that provision required scrutiny and the requested percentage exceeded the Ninth Circuit’s 25% benchmark, the court found at the preliminary stage that the proposed fee did not appear disproportionate to the class recovery. The court also found the notice procedure adequate, the workweek-based distribution equitable, the release appropriately tied to the case’s factual allegations, and Simpluris’s appointment appropriate. The court deferred final decisions on the exact attorneys’ fee amount and incentive awards.

Ruling and Orders

Judge Donna M. Ryu granted the motion for preliminary approval. The court preliminarily approved the settlement as fair, adequate, and reasonable under Rule 23(e); appointed Simpluris, Inc. as settlement administrator; approved the revised class notice; and approved procedures for exclusion and objections. The objection and exclusion deadline was February 2, 2022, and the final approval hearing was scheduled for March 24, 2022, at 1:00 p.m.

The court stayed the plaintiffs’ claims and temporarily barred pursuit of the released claims, except for claims of class members who timely and validly opted out. The order stated that if the settlement was not finally approved or terminated, the preliminary-approval order and related orders would become null and void, and the parties would return to their positions immediately before executing the settlement agreement.