Document ID: s3://data.kl3m.ai/documents/govinfo/USCOURTS/USCOURTS-caed-1_14-cv-00797/USCOURTS-caed-1_14-cv-00797-5/pdf.json

Parties Involved:
Frito-Lay, Inc.
Defendant
Eliazar Sanchez
Plaintiff

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UNITED STATES DISTRICT COURT

FOR THE EASTERN DISTRICT OF CALIFORNIA

ELIAZAR SANCHEZ, on behalf of 

himself and all others similarly situated,

Plaintiff,

v.

FRITO-LAY, INC.,

Defendant.

No. 1:14-cv-00797-DAD-MJS

ORDER DENYING MOTION FOR 

PRELIMINARY APPROVAL OF CLASS 

ACTION SETTLEMENT AND 

CONDITIONAL CLASS CERTIFICATION

(Doc. No. 20)

This putative class action arises from alleged violations of California wage and hour laws 

relating to maintenance mechanics. Before the court is plaintiff’s unopposed motion for 

preliminary settlement approval and conditional class certification. (Doc. No. 20.) On May 3, 

2016, this matter came before the court for hearing. Attorney Jerusalem Beligan appeared on 

behalf of plaintiff Eliazar Sanchez. Attorney Ashley Hirano appeared on behalf of defendant 

Frito-Lay, Inc. (―Frito-Lay‖). For the reasons stated below, plaintiff’s motion will be denied.

BACKGROUND

A. Procedural History

Plaintiff Eliazar Sanchez filed this putative class action in state court on April 11, 2014. 

The complaint states ten causes of action under California law: (1) failure to pay regular hourly 

wages, (2) failure to pay overtime wages, (3) failure to pay the correct overtime rate of pay, (4) 

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failure to pay premium wages for denial of meal and rest periods, (5) failure to pay vested 

vacation wages, (6) illegal deductions of vested vacation wages, (7) breach of contract for failure 

to pay vested wages, (8) failure to pay final wages due upon termination, (9) failure to provide 

accurate itemized wage statements, and (10) violations of California Unfair Competition Law. 

(Doc. No. 1-3.) The putative class comprises non-exempt hourly employees of defendant, the 

owner and operator of distribution centers throughout California. Plaintiff generally alleges that 

defendant Frito-Lay implemented policies and practices that resulted in the alleged violations of 

employment laws. On May 23, 2014, defendant Frito-Lay removed the case to this court. (Doc. 

No. 1.) 

After the class action was filed, class counsel investigated the claims further and 

determined that the contemplated class needed to be narrowed to cover only alternative work 

week employees (e.g., those working four ten-hour days a week) in the position of ―Maintenance 

Mechanic.‖ (Doc. No. 20-2 ¶ 11.) Accordingly, plaintiff proceeded on two primary allegations 

related to these employees. First, plaintiff alleges defendant Frito-Lay engaged in a companywide practice by which employees were denied a second meal period for every shift of ten or 

more hours. Second, plaintiff alleges Frito-Lay’s company-wide practice and written rest break

policy failed to authorize and permit a third rest break for shifts of ten or more hours. 

After submitting to mediation, the parties executed a settlement agreement. (See Doc. No. 

9-3.) On December 11, 2014, plaintiff filed an unopposed motion for preliminary approval of the 

class action settlement and conditional certification of the class. (Doc. No. 9.) On January 30, 

2015, the matter was presented before the assigned magistrate judge for a hearing. (Doc. No. 11.) 

The parties were directed by the magistrate judge to file supplemental briefing regarding a 

number of perceived deficiencies in the motion. (See id.) On August 5, 2015, the assigned 

magistrate judge issued findings and recommendations recommending that the motion be denied 

after concluding that plaintiff failed to provide sufficient information to establish a class or to 

permit a determination that the proposed settlement falls within the range of possible approval. 

(Doc. No. 16.) The then-assigned district judge adopted those findings and recommendations and 

denied plaintiff’s motion. (Doc. No. 17.) 

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On December 4, 2015, this case was reassigned to the undersigned. (Doc. No. 18.) On 

January 14, 2016, plaintiff filed a renewed motion for preliminary approval and conditional class 

certification in response to the court’s findings and included additional factual evidence supported 

by declarations of plaintiff Sanchez and his counsel. (Doc. No. 20.) On February 16, 2016, the 

matter came before the undersigned for hearing. At that hearing, the court noted that plaintiff’s 

motion did not fully address the court’s previously expressed concerns. The matter was 

continued for further hearing, and on April 19, 2016, plaintiff filed supplemental briefing and a 

revised settlement agreement in response to the modifications to the settlement terms suggested 

by the court at the February 16, 2016 hearing. (Doc. No. 27.) 

B. The Proposed Amended Settlement Agreement

In response to the court’s concerns, the parties executed an amended settlement agreement

(―Amended Settlement‖). (Doc. No. 27-2.) The Amended Settlement includes the following key 

provisions:

Class Definition (Amended Settlement § VIII.2). For settlement purposes, the class is 

defined as ―all present and former employees of Frito-Lay, Inc. in the State of California who 

have held the title of Maintenance Mechanic or any similar position at any point between April 

11, 2010, and March 10, 2015.‖

Settlement Fund (Amended Settlement § VIII.5). The parties agree to establish a 

settlement fund of $600,000.00, inclusive of attorney’s fees, costs, and expenses; the incentive 

payment to the named plaintiff; payment to the Labor Workforce Development Agency; and all 

costs of administration, including settlement administration fees. 

Attorneys’ Fees and Costs (Amended Settlement § VIII.6). The Amended Settlement 

authorizes an award of up to $150,000.00 to class counsel in attorney’s fees, which represents

25% of the total settlement fund. The Amended Settlement further authorizes an award of up to 

$20,000.00 to class counsel for costs.

Incentive Payment (Amended Settlement § VIII.8). The Amended Settlement authorizes 

an award of up to $7,500.000 to the named plaintiff as an incentive award.

/////

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Allocation Method (Amended Settlement § VIII.7). After deducting amounts for awards 

for fees, costs, incentive payment, PAGA payment, and claims administration expenses, the 

remaining fund will be allocated to settlement class members, which include those class members 

who submit a timely and properly completed claim form. The payout fund will be distributed 

based on the number of weeks each plaintiff worked as a Maintenance Mechanic during the 

applicable period. This figure is inclusive of the weeks worked by class members who have 

opted out or have not submitted claim forms.

Releases (Amended Settlement § VIII.3). ―Class Members‖ (those who have not 

requested exclusion from the class) shall fully and finally release Frito Lay of any and all state 

law claims. ―Settlement Class Members‖ (only those who return a claim form) also release Frito 

Lay of any and all federal law claims.

Unclaimed Settlement Funds (Amended Settlement § VIII.7(b)(iii)). All unclaimed 

settlement funds will be first used to pay any employer-owed payroll tax obligations arising from 

the payments made under the settlement agreement. Any remaining funds will be distributed cy 

pres to the United Way, with 50% of that distribution to be earmarked for a veterans’ 

organization affiliated the United Way, if practicable.

LEGAL STANDARD & PROCESS FOR APPROVAL OF CLASS SETTLEMENTS

―Courts have long recognized that settlement class actions present unique due process 

concerns for absent class members.‖ In re Bluetooth Headset Prods. Liab. Litig., 654 F.3d 935, 

946 (9th Cir. 2011) (citation and internal quotations omitted). To protect the rights of absent 

class members, Rule 23(e) of the Federal Rules of Civil Procedure requires the court approve all 

class action settlements ―only after a hearing and on finding that it is fair, reasonable, and 

adequate.‖ Fed. R. Civ. P. 23(e)(2); Bluetooth, 654 F.3d at 946. However, it has been recognized 

that when parties seek approval of a settlement agreement negotiated prior to formal class 

certification, ―there is an even greater potential for a breach of fiduciary duty owed the class 

during settlement.‖ Bluetooth, 654 F.3d at 946. Thus, the court must review such agreements 

with ―a more probing inquiry‖ for evidence of collusion or other conflicts of interest than what is 

normally required under the Federal Rules. Hanlon v. Chrysler Corp., 150 F.3d 1011, 1026 (9th 

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Cir. 1998); see also Bluetooth, 654 F.3d at 946.

When parties seek class certification for settlement purposes only, Rule 23 ―demand[s]

undiluted, even heightened, attention‖ to the requirements for certification. Amchem Prods., Inc. 

v. Windsor, 521 U.S. 591, 620 (1997). Although here the parties do not dispute that the class 

exists for the purposes of settlement, the district court must examine the propriety of certification 

under Rule 23 both at this preliminary stage and at a later fairness hearing. See, e.g., Ogbuehi v. 

Comcast, No. 2:13-cv-00672-KJM-KJN (E.D. Cal. Oct. 2, 2014); West v. Circle K Stores, Inc., 

No. 04-cv-0438 WBS GGH, 2006 WL 1652598, at *2 (E.D. Cal. June 13, 2006).

Review of a proposed class action settlement ordinarily proceeds in three stages. See

Manual for Complex Litigation (4th) § 21.632. First, the court conducts a preliminary fairness 

evaluation and, if applicable, considers conditional class certification. Id. Second, if the court 

makes a preliminary determination on the fairness, reasonableness, and adequacy of the 

settlement terms, the parties are directed to prepare the notice of certification and proposed 

settlement to the class members. Id. Third, the court holds a final fairness hearing to determine 

whether to approve the settlement. Id.; see also Narouz v. Charter Commc’ns, Inc., 591 F.3d 

1261, 1266–67 (9th Cir. 2010). 

DISCUSSION

Plaintiff asks this court to make a preliminary finding of fairness, reasonableness, and 

adequacy as to the Amended Settlement. For the reasons set forth below, the court concludes

plaintiff has failed to establish that the Amended Settlement is fair or reasonable in light of the 

evidence before the court.

To assess the fairness of a settlement under Rule 23(e), district courts generally should 

weigh

(1) the strength of the plaintiff's case; (2) the risk, expense, 

complexity, and likely duration of further litigation; (3) the risk of 

maintaining class action status throughout the trial; (4) the amount 

offered in settlement; (5) the extent of discovery completed and the 

stage of the proceedings; (6) the experience and views of counsel; 

(7) the presence of a governmental participant; and (8) the reaction 

of the class members of the proposed settlement.

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Bluetooth, 654 F.3d at 946 (citing Churchill Vill., L.L.C. v. Gen. Elec., 361 F.3d 566, 575 (9th 

Cir. 2004). Prior to formal class certification, a preliminary fairness determination is appropriate 

―[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.‖ In 

re Tableware Antitrust Litig., 484 F. Supp. 2d 1078, 1079 (N.D. Cal. 2007). 

In denying plaintiff’s original motion for preliminary settlement approval, the court noted

as follows:

Plaintiffs’ assumed violation rate is further illustrative of the 

inadequacy of Plaintiffs’ submission; this Court cannot satisfy its 

obligation to determine the fairness of the settlement agreement on 

behalf of the absent putative class members without requiring proof 

of a violation rate based on something more than Plaintiffs’ 

conclusion. A full explanation of Defendant’s relevant employment 

policies complimented by an explanation of how and how often they 

impacted the putative class members would likely go far to resolve 

those issues.

(Doc. No. 17 at 2) (citation omitted). Plaintiff has submitted additional information and 

supplemental briefing in support of the instant motion. While plaintiff has now addressed some 

of the court’s prior expressed concerns, counsel’s explanation of how he determined a violation 

rate in this case raises significant concerns about the reasonableness of the settlement value and 

the degree to which the Amended Settlement was the product of serious and informed 

negotiations. 

In this regard, plaintiff argues that in the face of the risks inherent in further litigation, the 

parties agreed to a compromise of $600,000.00, which represents roughly 44% of the 

$1,366,089.60 in liability resulting from defendant’s alleged failure to provide adequate meal 

periods and rest breaks. (Doc. No. 20-1 at 12–13.) To establish a total value for plaintiff’s meal 

period and rest break claims, plaintiff’s counsel describes his review and analysis of a random 

sampling of time and payroll data of 31 of the 137 putative class members. (Doc. No. 20-1 at 17–

18; see also Doc. Nos. 20-2 ¶¶ 12–17; 27 at 5.) Based on this sampling, plaintiff determined that 

class members routinely worked ten-hour shifts but took only one meal period and no more than 

two rest breaks. (Doc. No. 20-1 at 17.) Plaintiff’s counsel assumed that on average, putative 

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class members were subject to one meal period violation and one rest break violation per week. 

(Id. at 18.) Further, plaintiff’s counsel calculated the total number of relevant workweeks by 

multiplying the number of class members (137 class members) by the number of weeks in the 

class period (241 weeks). (Id.) Based on pay stub data, plaintiff’s counsel estimated that class 

members worked an average 33.6 full-time weeks per year, or 65% of the year. (Id.) To obtain a 

value for the claims at issue, plaintiff’s counsel multiplied the assumed violation rate (1 

violation/week), by the adjusted number of relevant workweeks (21,520 weeks),1by the average 

hourly rate to be paid per violation ($31.74/violation). (Id.; Doc. No. 27-1 ¶ 5.) This resulted in a 

value of $683,044.80 for each type of violation, and a total value of $1,366,089.60 for both meal 

period and rest break violations. (Doc. No. 27-1 ¶¶ 5–6.)

In response to the court’s inquiry as to how plaintiff arrived at an assumed violation rate, 

plaintiff’s counsel provided additional information in his supplemental briefing. (See Doc. No. 

27.) Therein, plaintiff’s counsel explains that the sampling of pay stubs indicated an average rate 

of two meal period violations and two rest break violations per week. (Doc. No. 27-1 ¶¶ 5–6.) 

Plaintiff’s counsel multiplied this violation rate (2 violations/week) by 65%, based on reasoning 

that putative class members worked 65% of the year, to arrive at a violation rate of 1.3 violations 

per week. (Id.) Plaintiff’s counsel then rounded this number down to the nearest whole number, 

or one violation per week, to obtain an assumed violation rate. (Id.)

Plaintiff’s counsel’s method for obtaining an assumed violation rate is perplexing at best, 

for at least two reasons. First, while it is certainly reasonable to adjust the number of relevant 

workweeks by the average percentage of weeks actually worked, it is unclear why such an 

adjustment needs to be made on a per-week violation rate as well. Such an adjustment effectively 

discounts plaintiff’s total recovery value a second time. Second, plaintiff’s counsel provides no 

explanation, in written submissions or at the further hearing on the pending motion, as to why the 

adjusted violation rate (1.3 violations/week) needed to be rounded down to a whole number. A 

 

1

Plaintiff’s counsel states the adjusted number of relevant workweeks is 21,520. The court notes 

that according to plaintiff’s own figures, this number should apparently be 21,461.05 (i.e., 137 × 

241 × 0.65).

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violation rate represents the average number of violations each putative class member suffered on 

a weekly basis—not the actual number of real-world violations that occurred every week. As a 

result of counsel’s discounting the violation rate (i.e., from two violations per week to one), 

plaintiff’s valuation of his claims was effectively reduced by half. Thus, the parties’ compromise 

represents only 22% of the class’s potential recovery.2

In light of the foregoing, this court cannot conclude that plaintiff has made an adequate 

showing sufficient to warrant a preliminary finding that the proposed Amended Settlement is fair, 

reasonable, and adequate. Although it is true that a settlement agreement amounting to a low 

percentage of the class’s potential recovery does not render the agreement per se inadequate or 

unfair, see Officers for Justice v. Civil Serv. Comm’n of City & Cty. of San Francisco, 688 F.2d 

615, 628 (9th Cir. 1982), plaintiff’s counsel’s miscalculations in this case raise significant 

concerns on the part of the court about whether he adequately represented the interests of the 

absent putative class members in settlement negotiations and the extent to which the Amended 

Settlement is the product of a well-informed negotiation. Procedurally, the parties appear to have 

engaged in a good-faith effort to engage in arms-length, non-collusive negotiations. However, 

assuming plaintiff’s counsel relied on a faulty valuation, he severely compromised any potential 

recovery before arriving at the negotiating table and before the parties could account for other 

factors, such as the strength of plaintiff’s claims and the risks and expenses of continued 

litigation. Thus, the settlement value as proposed appears to represent an unnecessary and 

unjustified discounting of plaintiff’s claims. 

Substantively, such an unjustified discounting of the putative class’s claims presents a 

clear deficiency in the Amended Settlement. To address whether a proposed settlement is 

substantively fair or adequate, courts must ―consider plaintiffs’ expected recovery balanced 

against the value of the settlement offer.‖ Tableware, 484 F. Supp. 2d at 1080. Here, the 

 

2 Despite the concerns expressed by the court at hearing, plaintiff’s counsel requested 

preliminary approval of the Amended Settlement so that class members would be given notice 

and an opportunity to object to the settlement terms. The court is unmoved by this suggestion as 

plaintiff’s proposed notices to class members provide no information as to plaintiff’s valuation 

methodology. In any event, given counsel’s apparent confusion about his own calculations, it 

would be unrealistic to expect class members to be able to raise such an issue in objections.

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Amended Settlement provides 22% of the potential recovery value of the claims on which 

plaintiff has chosen to proceed. Without more, it is questionable that recovery under the 

Amended Settlement is reasonable or ―within the range of possible approval.‖ See id. at 1079. 

Moreover, under the terms of the Amended Settlement, all class members who do not 

affirmatively exclude themselves from the litigation release all state claims against the defendant, 

and class members who submit claim forms also waive their federal claims. Plaintiff has failed to 

make a preliminary showing that the value of the Amended Settlement is reasonable in light of 

such a broad release provision. Because the court cannot presume that such a settlement is 

reasonable, the court denies preliminary approval. 

Because the court denies preliminary approval of the proposed settlement, it also declines 

to address whether plaintiff has provided sufficient information to certify the class for settlement 

purposes.

ORDER

For the reasons set forth above,

1. Plaintiff’s motion for preliminary settlement approval and conditional class 

certification (Doc. No. 20) is denied; and

2. The matter is referred to the assigned magistrate judge for purposes of re-scheduling 

further proceedings in this action. 

IT IS SO ORDERED.

Dated: May 24, 2016 

UNITED STATES DISTRICT JUDGE

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