Source: s3://data.kl3m.ai/documents/govinfo/USCOURTS/USCOURTS-cand-3_02-cv-04546/USCOURTS-cand-3_02-cv-04546-4/pdf.json

Nature of Suit Code: 790
Nature of Suit: Other Labor Litigation
Cause of Action: 28:1332 Diversity-Other Contract

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United States District Court

For the Northern District of California

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United States District Court

For the Northern District of California

IN THE UNITED STATES DISTRICT COURT

FOR THE NORTHERN DISTRICT OF CALIFORNIA

TONI YOUNG, individually and on

behalf of all others similarly

situated,

Plaintiffs,

v

POLO RETAIL, LLC, et al, 

Defendants. /

No C-02-4546 VRW

ORDER

In this putative class action, plaintiff Toni Young

contends that defendants Polo Retail, LLC, Polo Ralph Lauren Corp

(collectively, “Polo”) and Ralph Lauren Footwear, Inc (“RL

Footwear”) violated California law by requiring class members to

purchase clothing manufactured by their employer on a seasonal

basis. The parties have now reached a settlement. Accordingly,

presently before the court are plaintiff’s motions to: (1) grant

provisional certification of the settlement class, including its

sub-classes; (2) assign Toni Young as class representative and her

counsel as lead counsel to the class; (3) grant preliminary

approval of the settlement reached by the parties; (4) approve the

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proposed form of notice; (5) establish a schedule for class members

to object to the settlements and (6) schedule a hearing on final

approval of the settlement at which class members may be heard. 

Doc #114 at 1. For the reasons stated below, the court GRANTS all

of plaintiff’s motions.

I

Before addressing the instant motions, the order briefly

describes the factual background, procedural history and proposed

settlement for this case.

A

On October 1, 2002, plaintiff filed a first amended

complaint (FAC) in this diversity case on behalf of herself and a

class of current and former employees of defendants’ retail stores

in California. FAC at 3, ¶ 7. Specifically, the FAC alleges that

defendants violated several California laws: (1) the Cartwright

Act, Cal Bus & Prof § 16700 et seq, (2) California’s Unfair

Competition Law (UCL), Cal Bus & Prof § 17200 et seq, (3) Cal Labor

Code § 2802, (4) Cal Labor Code § 450 and (5) Cal Labor Code § 201. 

See FAC 9-14, ¶¶ 33-64. For these alleged violations, the FAC

seeks declaratory relief, injunctive relief, compensatory damages,

treble damages (under the Cartwright Act), punitive or exemplary

damages and an award of attorneys’ fees and costs. See id at 14-

15, Prayer.

The FAC identifies two putative classes on whose behalf

plaintiff proposes to prosecute this action: (1) the main class,

defined as “[a]ll persons who are and were employed by [d]efendants

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in the State of California and who were required to purchase Ralph

Lauren clothing and accessories as a condition of their employment

at any time” and (2) the Labor Code § 201 sub-class, defined as

“[a]ll persons within [t]he [m]ain [c]lass who have participated in

[d]efendants’ [s]pecial [p]urchase [p]rogram [described below] (and

any predecessor wage-withholding program).” Id at 7, ¶ 26.

Briefly, plaintiff alleges that the dress code for

employees working in retail sales for defendants, as implemented by

managers at defendants’ retail stores, constitutes an unlawful

uniform policy. According to the FAC, defendants’ retail employee

handbook for 2002 requires all sales staff of Polo Ralph Lauren

retail stores to wear Polo Ralph Lauren merchandise while at work. 

Id at 3, ¶ 8. In furtherance of this policy, plaintiff alleges

that managers employed by defendants subjected plaintiff and other

members of the main class to “improper and demeaning inspections”

and even “strip searches” to ensure compliance with the uniform

policy. Id at 3, ¶ 8, 4, ¶ 10. Plaintiff alleges that defendants’

employees were threatened with termination if they failed to dress

as required. Id at 4, ¶ 11. The core allegation of the FAC is

that members of the main class were required by their employer to

purchase clothing manufactured by their employer on a seasonal

basis. As a practical matter, plaintiff alleges, this policy

forced defendants’ employees to buy high-priced clothing and

accessories directly from defendants.

In addition, plaintiff alleges that defendants’ “PRC

Special Purchase Program” violates state law. Id at 5, ¶ 16. 

Through this program, plaintiff alleges, “[d]efendants ‘advance’

Polo Ralph Lauren products to their employees * * * and then

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withhold wages from their employees to pay for the apparel and

accessory purchases.” Id. Although the program offers clothing to

defendants’ employees for purchase at a substantial discount,

plaintiff alleges that “[t]he program is designed to create a

captive, dependent, vulnerable and profitable customer base, i e,

[d]efendants’ sales associates, who must purchase Polo Ralph Lauren

apparel and accessories as a condition of employment.” Id.

B

On March 18, 2003, defendants filed a notice of pendency

of another action, informing the court that a class action alleging

the same wrongful conduct had been filed in San Francisco County

superior court under the name Esteen, et al v Polo Ralph Lauren

Corp, et al, CGC-03-418019. Doc #11. On June 30, 2003, plaintiff

moved to dismiss the FAC for lack of jurisdiction. Doc #21. The

next day, defendants separately moved for (1) summary adjudication

on plaintiff’s claim under the Cartwright Act and contingent claims

for unfair competition and declaratory relief and (2) judgment on

the pleadings on plaintiff’s remaining claims. Docs ##12, 13, 16. 

On August 1, 2003, the court denied plaintiff’s motion to dismiss. 

Doc #66. On August 11, 2003, defendants moved for sanctions

pursuant to FRCP 11, contending that plaintiff’s counsel

frivolously moved to dismiss the FAC. Doc #74. On August 18,

2003, the court granted defendants’ motion for summary judgment

(Doc #81 at 4-8) but denied defendants’ motion for judgment on the

pleadings on the remaining claims. Id at 8-18.

On October 27, 2003, the court granted defendants’ motion

for monetary sanctions, noting that plaintiff’s motion to dismiss

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“was made in objective bad faith and was therefore frivolous” (Doc

#100 at 25) and that “plaintiff has engaged in a pattern of serving

harassing and vexatious motions and papers, apparently for the

purpose of facilitating the litigation of the claim in state court,

rather than federal court.” Id at 28-29. Accordingly, the court

concluded that “plaintiff’s motion to dismiss violates both the

frivolousness and improper purpose components of Rule 11” and

“reserve[d] the question of the amount of sanctions until the

conclusion of this case.” Id at 29-30. The court observed,

however, that “[i]t is possible that the inconvenience caused to

defendants warrants sanctions in an amount more than the costs and

fees associated with [plaintiff’s motion to dismiss and defendants’

motion for sanctions.]” Id at 30.

On January 12, 2006, plaintiff filed the instant motions

and the parties stipulated to amend the FAC so that Roy Esteen,

Raeshon Graham and Janika Goff would be added as named plaintiffs

and RL Footwear and Fashions Outlet of America, Inc would be added

as defendants. Doc #116. On January 31, 2006, the court granted

the parties’ stipulation. Doc #123.

C

The proposed settlement class consists of “[a]ll current

and former employees of [Polo] and/or [RL Footwear] who were

employed in any [Polo] retail or wholesale store in California at

any time from September 18, 1998, through May 12, 2004 (the ‘Class

Period’).” Doc #115, Ex D (Settlement Agreement) at 2. 

Plaintiff’s counsel estimate that approximately 4,900 employees

would be eligible for the settlement. Doc #114 at 11-12.

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The gross settlement amount is $1,500,000, comprising

$1,000,000 in cash and $500,000 in Polo gift cards. Settlement

Agreement at 8, ¶ 3; 12, ¶ 4(c)). From the gross settlement

amount, $25,000 is subtracted for an “incentive payment” to class

representative Toni Young, up to $75,000 is removed for

administrative fees and costs and $500,000 is subtracted for

attorneys’ fees, which in turn are split equally among the three

firms representing the putative class. Id at 8, ¶ 3; id at 13-14,

¶¶ 6(B), 6(c)).

Polo is to pay any reasonable administrative fees and

costs in excess of $75,000. Id at 8, ¶ 3. In short, assuming that

the full $75,000 is used for administrative fees, plaintiffs would

receive $400,000 in cash and $500,000 in Polo gift cards. Each

employee would then receive the cash and the gift cards in a 4:5

ratio summing to the total recovery to which the employee is

entitled. Id at 9, ¶ 4(A). Pursuant to a recent stipulation of

the parties, these gift cards would be transferable. Doc #148. 

Polo would retain the residue of any unused money or gift cards. 

Id at 13, ¶ 5.

Seventy-five percent of the settlement funds have been

earmarked for former and current employees who worked on a full or

part-time basis at any of Polo’s retail stores in California. Id

at 9-10, ¶ 4(B); 10 at ¶ 4(B)(1). The remaining twenty-five

percent has been allotted for employees who worked on a full or

part-time basis at any Polo factory outlet store in California. Id

at 10, ¶ 4(B); 11, ¶ 4(B)(3). The maximum amount that a retail

store employee could receive ranges from $1,000 to $3,000,

depending on his length of tenure. Id at 10, ¶ 4(B)(1). 

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Similarly, the maximum amount that a wholesale store employee could

receive ranges from $100 to $500, again depending on length of

tenure. Id at 11, ¶ 4(B)(3). The actual amount that the employees

receive depends on the number of people who join the settlement; if

necessary, each employee’s recovery would be reduced by a

particular percentage, with the recovery of those employees having

the longest tenure being reduced the most. Id at 10-11, ¶ 4(B)(2);

11-12, ¶ 4(B)(4).

In consideration for the settlement, plaintiffs agree to

waive any and all claims, whether for legal or equitable relief,

against defendants and any related entities. Id at 7-8, ¶ 2. One

provision in particular states, “Defendants shall not be required

as part of this [s]ettlement to enter into any consent decree, nor

shall [d]efendants be required to agree to any provision for

injunctive relief.” Id at 16, ¶ 9.

Notice is to be provided to class members by First Class

regular United States mail. Id at 18, ¶ 10(D). The settlement

provides specific procedures for objecting (id at 18-19, ¶ 10(E)),

requesting exclusion (id at 19-20, ¶ 10(F)) and submitting a claim

form (id at 20-22, ¶ 10(I)). The settlement also notes,

“Plaintiffs who fail to submit a valid and timely request for

exclusion on or before the [o]bjection/[e]xclusion [d]eadline

[d]ate shall be bound by all terms of the [s]ettlement and any

[f]inal [j]udgment entered in this [c]lass [a]ction if the

[s]ettlement is approved by the [c]ourt * * *.” Id at 19-20, ¶

10(F).

//

//

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II

FRCP 23(a) sets forth the preliminary requirements to

certifying a class action: (1) the class must be so numerous that

joinder of all members is impracticable; (2) there must be

questions of law or fact common to the class; (3) the claims or

defenses of the representative parties must be typical of the

claims or defenses of the class and (4) the representative parties

must be able fairly and adequately to protect the interests of the

class. See, e g, Armstrong v Davis, 275 F3d 849, 868 (9th Cir

2001).

In addition to satisfying the FRCP 23(a) prerequisites,

the class must also satisfy one of the three alternatives listed

under FRCP 23(b). Walters v Reno, 145 F3d 1032, 1045 (9th Cir

1998). Plaintiffs bear the burden of demonstrating they have

satisfied all four FRCP 23(a) elements and one FRCP 23(b)

alternative. Zinser v Accufix Research Institute, Inc, 253 F3d

1180, 1186 (9th Cir 2001). Failure to carry the burden on any FRCP

23 requirement precludes certifying a class action. Burkhalter

Travel Agency v MacFarms Intl, Inc, 141 FRD 144, 152 (ND Cal 1991)

(Jensen) (citing Rutledge v Electric Hose & Rubber Co, 511 F2d 668,

673 (9th Cir 1975)).

“In determining the propriety of a class action, the

question is not whether the plaintiff or plaintiffs have stated a

cause of action or will prevail on the merits, but rather whether

the requirements of Rule 23 are met.” Eisen v Carlisle &

Jacquelin, 417 US 156, 178 (1974) (quoting Miller v Mackey Intl,

452 F 2d 424 (5th Cir 1971)) (internal quotation marks omitted). 

Nonetheless, the court is “at liberty to consider evidence which

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goes to the requirements of Rule 23 even though the evidence may

also relate to the underlying merits of the case.” Hanon v

Dataproducts Corp, 976 F 2d 497, 509 (9th Cir 1992).

The court finds that the FRCP 23(a) requirements of

numerosity, commonality, typicality and adequacy are met. The

court further finds, pursuant to FRCP 23(b)(3), that common

questions of law and fact predominate over individual questions and

that class treatment of this matter is superior to any other

available means of adjudication. Accordingly, the court CERTIFIES

pursuant to FRCP 23 the settlement class.

III

Next, the court considers whether the proposed settlement

should be preliminarily approved.

“[The] preliminary determination establishes an initial

presumption of fairness * * *.” In re General Motors

Corp, 55 F3d 768, 784 (3d Cir 1995) (emphasis added). As

noted in the Manual for Complex Litigation, Second, “[i]f

the proposed settlement appears to be the product of

serious, informed, non-collusive negotiations, has no

obvious deficiencies, does not improperly grant

preferential treatment to class representatives or

segments of the class, and falls within the range of

possible approval, then the court should direct that the

notice be given to the class members of a formal fairness

hearing * * *.” Manual for Complex Litigation, Second §

30.44 (1985). In addition, “[t]he court may find that

the settlement proposal contains some merit, is within

the range of reasonableness required for a settlement

offer, or is presumptively valid.” Newberg on Class

Actions § 11.25 (1992).

Schwartz v Dallas Cowboys Football Club, Ltd, 157 F Supp 2d 561,

570 n12 (ED Pa 2001). In other words, preliminary approval of a

settlement has both a procedural and a substantive component. 

Plaintiff’s counsel has demonstrated that the procedure

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for reaching this settlement was fair and reasonable and that the

settlement was the product of arms-length negotiations. Yet the

court has some concerns about the substantive fairness and adequacy

of the settlement itself.

These concerns arise from the use of product vouchers in

the settlement award. The federal rules instruct the court that

“[s]ettlements involving nonmonetary provisions for class members *

* * deserve careful scrutiny to ensure that these provisions have

actual value to the class.” Advisory Committee note for FRCP

23(2)(C)(h). Product vouchers may benefit present employees who

still must purchase clothes for their jobs, but that is not the

case for former employees. Indeed, why would former employees, who

allegedly were forced to buy a great deal of unwanted Polo

products, desire product vouchers so that they could purchase even

more clothes? The transferability of the vouchers mitigates this

problem, but not entirely. Despite the parties’ assurances to the

contrary, the real economic value of such a voucher falls short of

their printed value. 

The degree to which the voucher’s printed value exceeds

its real economic value was an issue raised by the court during the

June 29, 2006, hearing. Doc #141. At the hearing, the court

ordered the parties “to file documentation indicating the real

economic values of gift cards for putative class members.” Id. In

response, Daniel L Feder filed a declaration presenting the results

of his analysis of the secondary market for such gift cards. 

Although anecdotal, the data suggest that the resale value of the

cards ranges from 80 to 85 percent of the printed value. Doc #137

at 8 (Feder decl). Because this estimation fails to account for

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transaction costs, the court finds the low end of the range, 80

percent of the printed value, best approximates the real economic

value of gift cards. 

In view of the voucher’s discounted value, it is unclear

to the court whether the settlement adequately compensates the

putative class for the damages they allegedly suffered. 

Plaintiff’s counsel have previously indicated that the lead

plaintiff, Toni Young, suffered approximately $23,181.84 in

damages, including tax. Doc #21 at 8. And plaintiff’s counsel

have not provided any evidence that this claim is atypically high;

indeed, plaintiff’s counsel contend for purposes of class

certification that Young is a typical plaintiff. Doc #114 at 13-

14. Accordingly, the court questions whether a maximum of $3,000

in recovery for retail store employees and $500 for outlet store

employees is sufficient, especially given that individual

recoveries would be reduced if enough employees joined the

settlement class.

To support the adequacy of the settlement, plaintiff’s

counsel note the settlement awards in related employment class

actions against The Gap and Banana Republic and Chico’s Fas 

involving nearly identical claims. Doc #136 at 3 (Kitchin decl);

Doc #137 at 4-5 (Feder decl). The settlement in the present action

exceeds the value obtained in these other cases, id, especially

after the product vouchers were made transferable. But the

pertinence of these comparisons is uncertain without an analysis of

the factual similarities and dissimilarities to the present case,

an analysis presently unavailable to the court. 

Nevertheless, plaintiff’s evidence of procedural

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fairness, in conjunction with the transferability of the product

vouchers, suffices for the purposes of preliminary approval. See

In re General Motors Corp, 55 F3d at 784 (noting the standard is

whether the settlement “falls within the range of possible

approval”). Accordingly, the court GRANTS preliminarily approval

of the proposed settlement, but anticipates readdressing this issue

at the final approval hearing. 

IV

The court next takes up the form of notice. Plaintiff

has provided a proposed form of notice, Doc #115, which is

satisfactory to the court in all respects except one. The notice

should apprise putative class members of the estimated economic

value of the product vouchers and should clarify that the vouchers

are transferable. 

Accordingly, the court APPROVES the proposed form of

notice, as to both form and content, SUBJECT to the following

amendments:

• As appropriate, references to “product vouchers” shall be

changed to “transferrable product vouchers.”

• The following language shall be inserted after the first

sentence in the second paragraph of part IV: “The

parties estimate the fair market value of the vouchers to

be eighty percent (80%) of the printed value. 

Accordingly, vouchers worth Five Hundred Thousand Dollars

($500,000.00) in printed value, as provided by the

Settlement Agreement, are worth approximately Four

Hundred Thousand Dollars ($400,000.00) in resale value.” 

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V

In sum, the court GRANTS plaintiff’s motion for

provisional certification of the settlement class and confirms

Rosenthal & Company as the claims administrator, Patrick Kitchin,

Daniel Feder and Freeborn & Peters as class counsels and Toni Young

as class representative. Additionally, the court ORDERS the

following schedule for further proceedings:

Polo and RL Footwear to provide

claims administrator data

identifying all class members

Within 30 calendar days of entry

of this order

First mailing of notice & claim

form to the class

Within 30 calendar days of the

date Polo and RL Footwear

provide class member data to

claims administrator

Deadline to postmark objections

and opt out

Within 30 calendar days of first

mailing, or 15 calendar days of

the follow-up mailing, which

ever is later

Deadline to postmark proof of

claim

Within 45 calendar days of first

mailing, or 15 calendar days of

the follow-up mailing, which

ever is later

Final settlement hearing and

final approval

January 25, 2007, at 2:00 pm

Payment of claims 60 calendar days after effective

date of settlement

Payment of attorney fees and

costs to class counsel

Within 30 calendar days of order

granting final approval, or if

any timely objection is filed by

a class member, within 30

calendar days of the effective

date of settlement

Payment of incentive fee to

class representative

Within 30 days of effective date

of settlement

Claims administrator to file

certification of completion of

administration of settlement

Within 210 calendar days of the

effective date of settlement

//

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At the final approval hearing on January 25, 2007, at

2:00 pm, the court will determine: (1) whether the proposed

settlement should be approved as fair, reasonable and adequate; (2)

the merits of objections, if any, made to the settlement or any of

its terms; (3) the amount of litigation costs, expenses and

attorney fees, if any, that should be awarded to class counsel; (4)

the amount of incentive payments, if any, to be made to Young for

her services performed in this action; and (5) other matters

related to the settlement, including the amount of sanctions the

court will impose pursuant to its October 27, 2003, order. 

IT IS SO ORDERED.

 

VAUGHN R WALKER

United States District Chief Judge

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