Source: s3://data.kl3m.ai/documents/govinfo/USCOURTS/USCOURTS-cand-3_18-cv-06364/USCOURTS-cand-3_18-cv-06364-1/pdf.json

Nature of Suit Code: 442
Nature of Suit: Civil Rights Employment
Cause of Action: 28:1332 Diversity-(Citizenship)

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United States District Court

Northern District of California

UNITED STATES DISTRICT COURT

NORTHERN DISTRICT OF CALIFORNIA

DAVID JOH, et al.,

Plaintiffs,

v.

AMERICAN INCOME LIFE INSURANCE 

COMPANY,

Defendant.

Case No. 18-cv-06364-TSH 

ORDER RE: RENEWED MOTION FOR 

FINAL SETTLEMENT APPROVAL

Re: Dkt. No. 60

Before the Court is the Plaintiffs’ Renewed Motion for Final Settlement Approval. ECF 

No. 60. For the reasons set forth below, the Court DENIES the Motion. 

I. BACKGROUND

The Court discussed the factual and procedural history of this matter at length in its 

January 9, 2020 order (ECF No. 53) denying Plaintiff’s initial Motion for Final Approval (“first 

motion”) (ECF No. 42). There is no need to do so again here, as the Plaintiffs move for approval 

with the Settlement Agreement (“SA”) unchanged. 

Reviewing the SA the first time around, the Court found that the proposed class met the 

requirements for certification under Federal Rule of Procedure 23, meaning the putative class was 

sufficiently numerous that joinder of all members would be impracticable; there were questions of 

law or fact common to the class; the Plaintiffs’ claims were typical of those of the class; and the 

class representatives would fairly and adequately protect the interests of the class. See Joh v. Am. 

Income Life Ins. Co., No. 18-CV-06364-TSH, 2020 WL 109067, at *3-5 (N.D. Cal. Jan. 9, 2020). 

The Court found that adequate notice had been given to class members as required by Rule 

23(e)(1). Id. at *5. Turning to the requirements of Rule 23(e)(2) for approval of the SA, the Court 

found that the agreement met the first three factors: the class representatives and their counsel had 

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adequately represented the class1(Rule 23(e)(2)(A)), the proposed settlement was negotiated at 

arm’s length (Rule 23(e)(2)(B)), and the proposed settlement amount was adequate in light of the 

risks and costs of continued litigation (Rule 23(e)(2)(C)). Id. at *6-8. 

On the last factor, equitable treatment of class members (Rule 23(e)(2)(D)), things hit a 

roadblock. The Court noted that by Plaintiffs’ own estimates, trainees who never became agents

(the “trainee-only” claims) would come away with approximately only 2% of the settlement fund 

amount, even though their claims constituted at least 12.6% of the total estimated liability. Id. at 

*9-10. In particular, trainee-only waiting-time penalties made up approximately 25% of waitingtime claims, which claims made up nearly 50% of the estimated total liability in the case. Id. And

waiting-time claims accrued once per trainee or agent, meaning those percentages were unaffected 

by how long an individual worked for American Insurance Life Insurance Company (“AIL”). Yet 

the SA would distribute funds based on weeks worked, and since agents had racked up the 

majority of workweeks simply by having worked longer, they would absorb most of the traineeonly claims. Id. The Court found this disparity compounded by the fact that Plaintiffs had 

assessed that trainees’ claims were stronger and easier to prove than agent claims. Id. In sum, 

Plaintiffs had admitted that trainee-only claims were easier to prove and, importantly, were more 

valuable than agents’, and yet agents would come out in the end with almost the entirety of the 

value of the settlement. Id. at * 10. Such an arrangement, the Court concluded, was not equitable 

and fair. Id. Accordingly, the Court found it could not approve the SA and denied Plaintiffs’ 

motion. Id.

At the hearing on the first motion for approval (the “motion hearing”), the undersigned

advised the parties that if they intended to file a new motion for approval of the SA, they should 

consider whether the SA needed to be restructured to address the disparity associated with the 

waiting-time claims. The undersigned cautioned that, unless there was something the Parties 

could show he was missing about the strength and value of the trainee-only waiting time claims, or 

the way the SA allocated the value of the settlement to class members, he didn’t see how you 

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In making this finding, the Court explicitly rejected Objectors’ argument that Plaintiffs and their 

counsel had engaged in a “reverse auction” settlement. 

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could equitably allocate that value based on workweeks rather than per person. 

II. ANALYSIS

A. The Waiting-Time Claims

Plaintiffs filed their Renewed Motion for Final Settlement Approval on February 20, 2020. 

They don’t present a reworked or improved SA. Instead, they attempt to repackage the same 

agreement in a new way in the hopes of getting approval. 

Plaintiffs now argue that their California Labor Code § 203 waiting-time claims are risker 

than their other claims, and that the § 203 claims are riskier for trainees than they are for agents 

and even riskier yet for trainees who never became agents. They argue that the trainee-only 

claims should be reduced by 75% to account for the additional difficulty that would come in 

proving those class members’ claims. This argument don’t pass muster. 

First, Plaintiffs emphasize that the § 203 claim is not a standalone claim but is instead 

dependent on the success of other claims. See Ling v. P.F. Chang’s China Bistro, Inc., 245 Cal. 

App. 4th 1242, 1261 (2016) (“Because a section 203 claim is purely derivative of ‘an action for 

the wages from which the penalties arise,’ it cannot be the basis of a fee award when the 

underlying claim is not an action for wages.”) (quoting Cal. Lab. Code § 203(b)). The waitingtime claim, Plaintiffs argue, “therefore incorporates the risk to the Class inherent in the other 

claims.” Renewed Mot. at 6. This point begs the question, “So what?” Even if the waiting-time 

claims are dependent on other claims, Plaintiffs represented in their first motion, aware then that 

the waiting-time claims were derivative, that “the legal claims related to the training periods are 

comparatively easier to demonstrate and more valuable than the claims related to the non-training 

employment period.” Mot. for Approval at 6 (emphasis added), ECF No. 42; see also Decl. of 

Steven M. Tindall in Supp. of Mot. for Approval (“Tindall Decl. 1”) ¶ 10, ECF No. 42-1

(“Plaintiffs’ Counsel was informed by their belief that the legal claims related to the time Class 

Members were in training with AIL were comparatively easier to demonstrate . . . in part because 

Class Members received no pay for their time spent in training, which Plaintiffs’ Counsel believed 

to be a clear violation of minimum wage laws.”). Even though the waiting-time claims are 

derivative, the trainees’ waiting-time claims are derivative of something stronger than the agents’ 

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waiting time claims are. 

Plaintiffs also now contend that AIL has a “colorable argument” that it had a “good faith” 

belief that Class Members were not entitled to wages. Renewed Mot. at 6. “A good faith belief in 

a legal defense will preclude a finding of willfulness” necessary for proving a violation of § 203. 

Armenta v. Osmose, Inc., 135 Cal. App. 4th 314, 325 (2006). “To demonstrate its good faith,” 

Plaintiffs now argue, “AIL could argue that Class Members were properly classified as 

independent contractors under caselaw and newly passed legislation (AB5).” Renewed Mot. at 6 

(emphasis added) (citing Cal. Lab. Code § 2750.3(b)(1) (exempting a person “licensed by the 

Department of Insurance” from classification as an “employee” under the independent contractor 

test). Plaintiffs also contend that “AIL could also argue that Class Members qualify as ‘outside 

salespersons’ who are exempt from wage requirements, as sales agents frequently worked in the 

field, away from any centralized office.” Renewed Mot. at 6 (emphasis added). It’s surprising

that Plaintiffs would raise these points now in trying to argue that trainees’ claims were weaker, 

because earlier they raised the exact same points in arguing that agents’ claims were weaker. See, 

e.g., Mot. for Approval at 13 (“[A]lthough Plaintiffs’ Counsel maintain that AIL misclassified its 

agents as independent contractors, AIL disagrees and has raised colorable arguments to that 

effect.”); Tindall Decl. 1 ¶ 10 (“Although trainees would need to demonstrate that their training is 

not akin to vocational school, sales agents would need to show that they were misclassified as 

independent contractors and that the outside salesperson exemption under California law does not 

exempt them from Labor Code protections.”); Decl. of Michael A. Gould (“Gould Decl.”) ¶ 10, 

ECF No. 42-9 (“Liability is difficult to prove in this case. AIL presented case law supporting its 

position that sales agents are typically recognized as independent contractors in the industry.”). 

Plaintiffs don’t explain their newfound concern that the independent contractor or outside 

salesperson issues might threaten their trainee claims. And even if Plaintiffs were genuinely of a 

different mind on this issue, that wouldn’t mean they got it wrong the first time. AIL also thought 

that the independent contractor argument made the agents’ claims weaker. Def’s’ Resp. to Class 

Member Objections (ECF No. 48) at 13 (“[T]hose . . . that both trained and contracted as sales 

agents faced other hurdles, including . . . the risk that the outside sales agent exemption set forth in 

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the applicable California wage order would gut their Labor Code claims for the time in which they 

had contracted as agents.”) (emphasis added) (quoting IWC Wage Order Four § I(C) at § 2(M) (an 

outside salesperson is “any person, 18 years of age or over, who customarily and regularly works 

more than half the working time away from the employer’s place of business selling tangible or 

intangible items or obtaining orders or contracts for products, services or use of facilities.”)). 

Plaintiffs also return to the point that trainees would have to prove they were employees 

under the Portland Terminal test in order to succeed on their claims. See Harris v. Vector Mktg. 

Corp., 753 F. Supp. 2d 996, 1005-06 (N.D. Cal. 2010) (discussing factors in Portland Terminal

test). Because of this, they assert, trainees’ waiting-time claims were riskier, and trainee-only 

claims riskier still. But Plaintiffs accounted for the Portland Terminal test originally, and yet still 

concluded that trainees’ claims were easier to prove and more valuable: 

Further, to calculate the Settlement shares, the training workweeks are 

double-weighted because, under Plaintiffs’ assessment, claims related 

to training are comparatively easier to demonstrate than those related 

to post-training work for AIL. For example, while trainees would be 

required to prove that their training is compensable under the factors 

set out in Portland Terminal and related cases, sales agents 

additionally would be required to establish that they are not subject to 

the arbitration provision in their Agent Contracts and then also show 

that they were improperly classified as independent contractors under 

both caselaw and newly-passed legislation and that the “outside 

salesperson” exemption does not apply to them.

Mot. at 16; see also Tindall Decl. 1 ¶ 10 (“Although trainees would need to demonstrate that their 

training is not akin to vocational school [(a Portland Terminal factor)], sales agents would need to 

show that they were misclassified as independent contractors and that the outside salesperson 

exemption under California law does not exempt them from Labor Code protections.”). Plaintiffs 

don’t attempt to explain this sudden about face on the strength of trainees’ claims.

Lastly, it is telling that the SA still double-weights training workweeks, and Plaintiffs still 

explain that those claims “more heavily weighted . . . to reflect their relative strength.” Reply at 6, 

ECF No. 62. Thus, even after working to convince the Court that trainees’ claims are weaker, 

Plaintiffs still admit that they’re stronger. 

In sum, Plaintiffs’ proffered reasoning for disregarding the value of trainee-only waitingtime claims is unconvincing. The Court invited Plaintiffs to provide additional briefing if it would 

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serve to highlight for the Court something it missed in denying the first motion to approve the SA. 

The renewed motion did not achieve that.

B. Failure to Provide Notice

Objectors assert that Plaintiffs must issue notice of the Renewed Motion before the Court 

can approve the SA. They argue that “the [SA] now includes resolution of a $5 million meal and 

rest break claim on behalf of Agents who have not been advised of the value of this claim and 

would not know that this claim is being resolved on their behalf if they investigated when they 

received the notice of the initial fairness hearing date.” Opp’n to Final Approval at 11, ECF No. 

61. Because the Court denies Plaintiffs’ Renewed Motion on other grounds, it need not decide 

whether Plaintiffs provided sufficient notice at this juncture. 

III. CONCLUSION

For the foregoing reasons, the Court DENIES Plaintiffs’ Renewed Motion for Final 

Settlement Approval.

IT IS SO ORDERED.

Dated: April 15, 2020

THOMAS S. HIXSON

United States Magistrate Judge

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