Fuapau v. LHOIST North America of Arizona, Inc.

Background

The plaintiffs brought a California state-law wage-and-hour action against their employer, Lhoist North America of Arizona, Inc., on behalf of themselves and other similarly situated employees. They alleged that Lhoist failed to pay all overtime wages, safety bonuses, and shift premiums; failed to provide or pay for required meal and rest periods; issued incomplete or inaccurate wage statements and records; failed to reimburse work-related cellphone expenses; and violated other California wage laws. The operative complaint asserted eleven claims, including claims under California’s Private Attorneys General Act, or PAGA, and claims by Gabriel Mendoza for retaliation and wrongful discharge.

The parties negotiated a proposed class and representative action settlement after discovery and two mediation sessions. The agreement called for Lhoist to pay a gross settlement amount of $320,000. The proposed settlement included payments to class members, up to $106,666.67 in attorney fees, up to $25,000 in attorney costs, estimated administration costs of $6,250, and payments resolving PAGA claims. The estimated amount remaining for individual class payments was $167,083.33. The proposed class consisted of approximately 115 non-exempt employees who worked in California during the period from October 20, 2017 through November 15, 2021.

Class certification

For settlement purposes, the court concluded that the proposed class met the numerosity, commonality, typicality, predominance, and superiority requirements under Rule 23 of the Federal Rules of Civil Procedure. The court found that approximately 115 members satisfied numerosity and that the claims involved common alleged wage-and-hour policies. It also found that a class action was likely more efficient than individual lawsuits.

The court found that all named plaintiffs other than Gabriel Mendoza met the adequacy requirement. Mendoza also had individual retaliation and wrongful-discharge claims that were reportedly resolved in a separate settlement. The parties provided no information about that separate settlement, so the court could not evaluate whether resolving Mendoza’s individual claims separately created a conflict between his interests and those of the class. The court therefore declined to appoint Mendoza as a class representative at that time.

The court provisionally appointed Sione Fuapau, Alfredo Godinez, Manuel Vaca, Michael Nau, Antonio Guzman, Jesus Guerrero, Ivan Pacheco, and Miguel Reyes, Jr. as class representatives. It also provisionally appointed Max Gavron, Larry W. Lee, B. James Fitzpatrick, and Laura L. Franklin as class counsel for settlement purposes only.

Reasons for denying preliminary approval

The court applied heightened scrutiny because the settlement was reached before formal class certification. It held that the plaintiffs had not provided enough information to show that the proposed settlement was fair, adequate, and reasonable.

First, the plaintiffs offered little case-specific analysis of the strength of their claims or the risks of further litigation. They largely stated that their attorneys believed the claims were meritorious and that litigation outcomes were uncertain. They did not address Lhoist’s asserted defense that some claims might be barred by prior waivers or releases.

Second, the court lacked enough information to evaluate the settlement amount. The plaintiffs estimated Lhoist’s potential exposure at $2,747,406.80. The $320,000 gross settlement represented 11.65 percent of that estimate, while the estimated $167,083.33 net settlement represented 6.08 percent. The court explained that percentage comparisons to other settlements were not useful without a fuller explanation of the specific risks and factors affecting this case’s potential recovery.

Third, although the parties’ discovery and mediation efforts supported the conclusion that they had investigated the claims, the proposed notice plan raised concerns. The notice did not fully explain what it meant for class members to be bound by a class-wide judgment. The court also questioned whether a single mailed notice was the best practicable method of reaching current and former employees, given other possible methods such as email, social media, and online postings.

Fourth, the proposed attorney-fee award was up to $106,666.67, or 33.33 percent of the gross settlement and 63.84 percent of the estimated net settlement. The court noted that 25 percent of a common settlement fund is generally used as a benchmark in the Ninth Circuit and found that the plaintiffs had not described special circumstances justifying a higher award. The court stated that the current record did not support an award exceeding 25 percent of the gross settlement amount.

Finally, the court found no evidence of explicit collusion, but it could not adequately evaluate the absence of more subtle conflicts. The proposed attorney-fee award appeared disproportionate without adequate justification, and the court still lacked information about Mendoza’s individual claims and their separate resolution.

Disposition

The court found that the plaintiffs met the requirements for conditional class certification but had not shown that Mendoza was an adequate class representative. It also found that the proposed settlement was not adequately shown to be fair, adequate, and reasonable. The court denied without prejudice the plaintiffs’ motion for preliminary approval of the class and representative action settlement and ordered the parties to jointly advise the court by March 28, 2022 how they intended to proceed.