Document ID: s3://data.kl3m.ai/documents/govinfo/USCOURTS/USCOURTS-cand-3_16-cv-05183/USCOURTS-cand-3_16-cv-05183-4/pdf.json

Parties Involved:
Hoovestol, Inc.
Defendant
Richard Terry
Plaintiff

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United States District Court

Northern District of California

UNITED STATES DISTRICT COURT

NORTHERN DISTRICT OF CALIFORNIA

RICHARD TERRY,

Plaintiff,

v.

HOOVESTOL, INC.,

Defendant.

Case No. 16-cv-05183-JST 

ORDER DENYING PRELIMINARY 

APPROVAL OF CLASS ACTION 

SETTLEMENT 

Re: ECF No. 55

Before the Court is Plaintiff’s motion for preliminary approval of a class action settlement. 

ECF No. 55. For the reasons below, the Court denies the motion.

I. BACKGROUND

A. The Parties and Claims

Plaintiff Richard Terry is a former Hoovestol truck driver. ECF No. 1-1 ¶ 27. Hoovestol 

is a company which hauls bulk mail for the United States Postal Service (“USPS”) and employs 

truck drivers in California. Id. ¶¶ 36–37. Terry brings this putative wage and hour class action for 

violations of California Labor Code Sections 226(b), 226.7, 510, 512, 515, 558, and 1194 as well 

as California Code of Regulations Title 8 Section 11090. Id. ¶ 24. He alleges causes of action for: 

failure to pay all straight time wages; failure to pay overtime; failure to provide meal periods; 

failure to authorize and permit rest periods; knowing and intentional failure to comply with 

itemized employee wage statement provisions; failure to pay all wages due at the time of 

termination of employment; and violation of Unfair Competition Law. ECF No. 55 at 8. 

B. Procedural History

Terry filed the initial complaint in this action in the Alameda County Superior Court on 

July 20, 2016. ECF No. 55 at 8. On September 8, 2016, Hoovestol removed the case to this Court 

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pursuant to the Class Action Fairness Act (“CAFA”). Id. On February 2, 2018, Terry filed a 

motion for class certification, proposing seven subclasses. See ECF No. 41. After Hoovestol’s 

opposition and Terry’s reply were filed, the Court ordered supplemental briefing regarding 

whether the subclasses satisfied the numerosity requirement of Rule 23. ECF No. 46. On March 

30, 2018, Terry filed a supplemental brief and a motion to strike. ECF Nos. 47, 49. Hoovestol 

also provided supplemental briefing. See ECF Nos. 50, 51.

After the exchange of discovery, mediation, and continued negotiation following 

mediation, the parties reached a proposed class action settlement. ECF No. 55 at 10. On June 14, 

2018, Terry filed the instant motion seeking preliminary approval of the proposed class action 

settlement including conditional certification of the settlement class. Id. at 1–2. Terry’s motions

for class certification and to strike were terminated as moot on June 18, 2018 in light of this 

motion. ECF No. 56. Pursuant to CAFA, Hoovestol sent notice of the proposed settlement to the 

United States Attorney General and the Attorney General of the State of California on June 22, 

2016. ECF No. 57. No Attorney General has submitted a statement of interest or objection in 

response to these notices. 

II. PRELIMINARY APPROVAL

A. Legal Standard

The Ninth Circuit maintains a “strong judicial policy” that favors the settlement of class 

actions. Class Plaintiffs v. City of Seattle, 955 F.2d 1268, 1276 (9th Cir. 1992). “The initial 

decision to approve or reject a settlement proposal is committed to the sound discretion of the trial 

judge.” City of Seattle, 955 F.2d at 1276 (citation omitted). The court’s task at the preliminary 

approval stage is to determine whether the settlement falls “within the range of possible approval.” 

In re Tableware Antitrust Litig., 484 F. Supp. 2d 1078, 1080 (N.D. Cal. 2007). Then, courts must 

hold a hearing pursuant to Rule 23(e)(2) to make a final determination of whether the settlement is 

“fair, reasonable, and adequate.”

Preliminary approval of a settlement is appropriate if “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 

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falls within the range of possible approval.” In re Tableware, 484 F. Supp. 2d at 1079 (quotations 

omitted). The proposed settlement need not be ideal, but it must be fair and free of collusion, 

consistent with counsel’s fiduciary obligations to the class. Hanlon, 150 F.3d at 1027

(“Settlement is the offspring of compromise; the question we address is not whether the final 

product could be prettier, smarter or snazzier, but whether it is fair, adequate and free from 

collusion.”). To assess a settlement proposal, courts must balance a number of factors: 

the strength of the plaintiffs’ case; the risk, expense, complexity, and likely 

duration of further litigation; the risk of maintaining class action status throughout 

the trial; the amount offered in settlement; the extent of discovery completed and 

the stage of the proceedings; the experience and views of counsel; the presence of 

a governmental participant; and the reaction of the class members to the proposed 

settlement. 

Id. at 1026 (citations omitted). The proposed settlement must be “taken as a whole, rather than the 

individual component parts” in the examination for overall fairness. Id. Courts do not have the 

ability to “delete, modify, or substitute certain provisions”; the settlement “must stand or fall in its 

entirety.” Id.

B. Terms of the Settlement

Under the terms of the agreement, Defendant agrees to pay no more than $100,000 as a 

gross settlement amount, without admitting liability. ECF No. 55-2 (“Settlement Agreement”) ¶¶ 

III.A, III.L.1. This amount includes Plaintiff’s attorneys’ fees and costs, the cost of class notice 

and settlement administration, the class representative’s enhancement award, and 

employer/employee payroll taxes on the portion of the settlement payments deemed wages. Id.

¶ I.V. Plaintiff’s counsel will seek $25,000 in attorney’s fees and no more than $20,000 in 

litigation costs. Id. ¶¶ I.D, I.M. The gross settlement amount includes $3,000 for settlement

administration costs. Id. ¶ I.B. In addition, Terry will be paid an enhancement award of $2,500 in 

exchange for the general release of all his claims against Hoovestol. Id. ¶¶ I.L, III.K.1 After these 

 

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The Court notes two significant typographical errors in the motion for preliminary approval. 

First, Terry describes the enhancement award as “an amount not to exceed $2,500.00 (Seven 

Thousand Five Hundred Dollars and No Cents).” ECF No. 55 at 11 (emphasis added). The Court 

interprets this to mean “Two Thousand Five Hundred Dollars and No Cents” consistent with the 

language used in the settlement agreement. Settlement Agreement ¶ III.K. Second, Terry states, 

“the settlement amount of $200,000 is fair and reasonable.” ECF No. 55 at 11 (emphasis added). 

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deductions from the gross settlement amount, approximately $49,500 will remain to be distributed 

among the participating class members. ECF No. 55 at 19. Each participating class member will 

receive a proportion of the amount “equal to (i) the number of weeks he or she worked for 

Hoovestol in California . . . divided by (ii) the total number of weeks worked by all Participating 

Class Members.” Settlement Agreement ¶ III.F.1.a. Sixty percent of each individual’s share is 

intended to settle claims for unpaid wages and forty percent is intended to settle claims for interest 

and penalties. Id. ¶¶ III.F.2.a, 2.b. The portion for unpaid wages will be “reduced by applicable 

payroll tax withholdings and deductions.” Id. 

Class members that wish to object must mail a written objection to the court no later than 

forty-five days after the settlement administrator mails the class notices. Id. ¶ III.I.4. Class 

members may opt-out of the settlement by mailing a written request for exclusion to the settlement 

administrator no later than forty-five days after the settlement administrator mails the class 

notices. Id. ¶ III.I.5.

The Settlement Agreement further provides that when checks mailed to participating class 

members are not redeemed or deposited within ninety days, the settlement administrator will mail 

a reminder postcard. Id. ¶ III.I.11. Ninety days after notice is mailed and within 200 days after 

the checks were initially mailed, funds from any unredeemed checks will be paid to the State

Treasury for the Trial Court Improvement and Modernization Fund and the Equal Access Fund of 

the Judicial Branch. Id. 

In exchange for the settlement awards, participating class members will release Hoovestol 

from liability as to “all known and unknown state law claims that were alleged or that could have 

been alleged based on the facts of the complaints filed in the matter.” Id. ¶ I.BB. 

C. Discussion

1. Non-Collusive Negotiations

Because this settlement was reached prior to class certification, the Court must examine the 

settlement for evidence of collusion with a higher level of scrutiny. In re Bluetooth Headset Prod. 

 

Again, the Court interprets this to say “$100,000” consistent with the terms of the settlement 

agreement. Settlement Agreement ¶ III.A. 

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Liab. Litig., 654 F.3d 935, 946 (9th Cir. 2011). The agreement was reached after the parties 

engaged in a mediation session, exchanged some discovery, fully briefed a motion for class 

certification, and continued arms-length negotiation. ECF No. 55 at 8-10. These facts support the 

conclusion that the settlement is non-collusive and likely to benefit the class members. Harris v. 

Vector Mktg. Corp., No. C-08-5198 EMC, 2011 WL 1627973, at *8 (N.D. Cal. Apr. 29, 2011) 

(explaining that use of an experienced mediator “suggests that the parties reached the settlement in 

a procedurally sound manner and that it was not the result of collusion or bad faith by the parties 

or counsel”). Additionally, the settlement agreement does not contain a reversionary clause. All 

of the gross settlement award will be distributed to the class and funds from checks that remain 

unredeemed or uncollected will be distributed to the Trial Court Improvement and Modernization 

Fund and the Equal Access Fund of the Judicial Branch. Settlement Agreement ¶ III.I.11; see In 

re Bluetooth Headset, 654 F.3d at 947 (discussing reversionary clauses as a sign of collusion). 

The settlement agreement does contain a clear sailing provision. Settlement Agreement ¶ 

III.G.2. While a clear sailing provision may be considered a sign of collusion under some 

circumstances, it “does not signal the possibility of collusion” where, as here, class counsel’s fees 

and costs are awarded from the same gross settlement amount as the class. Rodriguez v. West

Publ’g Corp., 563 F.3d 948, 961 n.5 (9th Cir. 2009). “This scenario does not signal the possibility 

of collusion because, by agreeing to a sum certain, [Hoovestol was] acting consistently with [its] 

own interests in minimizing liability. “ Id. The Court concludes that the negotiations and 

agreement were non-collusive. 

2. Risk, Expense, Complexity, and Likely Duration of Further Litigation

The parties disagree over whether this case is “factually and legally strong.” Terry 

acknowledges that he will face “numerous obstacles, including obtaining and maintaining class 

certification status . . . especially when taking into consideration the individual releases Defendant 

has obtained.” ECF No. 55 at 30. However, the Court agrees with the parties that it would be 

more expensive and time-consuming to litigate this case through trial and that resolution of this 

action through settlement is appropriate. Settlement Agreement ¶¶ II.I, II.J. This factor weighs in 

favor of preliminary approval. 

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3. The Amount Offered in Settlement

The Court must also consider whether the settlement amount falls within the range of 

possible approval. Lusby v. Gamestop Inc., 297 F.R.D. 400, 415 (N.D. Cal. 2013). To evaluate 

adequacy, courts primarily compare the plaintiffs’ expected recovery at trial to the value of the 

proposed settlement. In re Tableware, 484 F. Supp. 2d at 1080. In this case, Class Counsel 

estimates that if Plaintiffs were to prevail, Hoovestol’s maximum potential exposure would total 

approximately $2,440,402. ECF No. 55-1 ¶¶ 26–29. While the settlement amount of $100,000

represents a small fraction of Hoovestol’s maximum potential exposure, “a cash settlement 

amounting to only a fraction of the potential recovery does not per se render the settlement 

inadequate or unfair.” Cordy v. USS-Posco Indus., No. 12-CV-00553-JST, 2013 WL 4028627, at 

*4 (N.D. Cal. Aug. 1, 2013) (quoting In re Mego Fin. Corp. Sec. Litig., 213 F.3d 454, 459 (9th 

Cir. 2000)). 

Terry claims that the settlement amount reflects the discounting of his exposure analysis in 

light of Hoovestol’s defenses and the best interests of the class. ECF No. 55 at 30. In particular, 

Plaintiff notes Hoovestol’s negotiations with most of the drivers in the class to secure individual 

releases of their claims. Id. at 29. Plaintiff also notes the risk that he will not be able to obtain and 

maintain class certification through trial with the remaining thirty-nine members of the settlement 

class. Id. at 29–30. Additionally, Plaintiff identifies the risk that a factfinder could agree with 

Hoovestol’s defenses, reducing recovery on certain claims to zero, as well as the risk that Plaintiff 

will be unable to prove the total amount of harm at trial. Id. at 30. Given the magnitude of these 

risks, the Court finds the gross settlement amount is within the range of possible approval. 

The Court also finds the settlement agreement with respect to attorney’s fees, costs, and 

the enhancement award is within the range of possible approval. Plaintiff’s counsel requests

$25,000, or 25% of the gross settlement amount, which falls within the 25% “benchmark” set by 

the Ninth Circuit for class action attorney’s fees awards. See In re Bluetooth Headset, 654 F.3d at 

942. The Court also notes that Terry’s $2,500 enhancement award is well within the $5,000 figure 

typical for enhancement awards in this Court. See Harris v. Vector Mktg. Corp., No. C-08-5198 

EMC, 2012 WL 381202, at *7 (N.D. Cal. Feb. 6, 2012) (“Several courts in this District have 

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indicated that incentive payments of $10,000 or $25,000 are quite high and/or that, as a general 

matter, $5,000 is a reasonable amount.”). This amount is also reasonable in light of Terry’s

execution of a broader release. ECF No. 55 at 12; see Salamanca v. Sprint/United Mgmt. Co., No. 

15-CV-05084-JSW, 2018 WL 1989568, at *4 (N.D. Cal. Mar. 9, 2018) (finding an additional 

$10,000 payment reasonable in light of the execution of a broader general release than the rest of 

the class and a no-hire agreement).

The Court need not, at this juncture, resolve the specific amount of attorney’s fees, costs,

or Terry’s payment, since such matters will be finally determined at the fairness hearing.

However, counsel should be mindful of addressing these issues and providing appropriate detail 

and documentation in connection with the motion for final approval and motion for attorney’s

fees, costs, and enhancement award.

4. The Extent of Discovery Completed and the Stage of Proceedings

The parties have conducted some discovery in this case. Plaintiff served two sets of 

special interrogatories and two sets of requests for production of documents on Hoovestol, and 

Hoovestol served two sets of requests for production of documents on Terry. ECF No. 55 at 9. In 

the process, Plaintiff’s counsel reviewed “hundreds of pages of documents” and “interviewed 

numerous class members.” Id. Plaintiff’s counsel deposed Hoovestol’s Senior Director of Safety, 

Lynda Kuhn, and Hoovestol deposed Terry and his class certification expert. Id. The Court 

agrees that this discovery process allowed the parties to gather “sufficient information to make an 

informed decision about the settlement.” In re Mego, 213 F.3d at 459.

5. The Experience and Views of Counsel

Based on experience, class counsel believes the settlement agreement is “fair, adequate, 

and reasonable.” Settlement Agreement ¶ II.I. This weighs in favor of its approval.2

 

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“The Court considers this factor, as it must, but gives it little weight. ‘Although a court might 

give weight to the fact that counsel for the class or the defendant favors the settlement, the court 

should keep in mind that the lawyers who negotiated the settlement will rarely offer anything less 

than a strong, favorable endorsement.’” Thomas v. MagnaChip Semiconductor Corp., No. 14-CV01160-JST, 2017 WL 4750628, at *7 n.4 (N.D. Cal. Oct. 20, 2017) (citing Principles of the Law 

of Aggregate Litigation § 3.05 comment a (2010)).

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6. Preferential Treatment

For this factor, the Court looks at whether the settlement agreement provides preferential 

treatment to any class member. Under the settlement agreement, participating class members 

receive a proportion of the net settlement amount that is equal to the number of weeks he or she 

worked divided by the total weeks worked by all participating members. Id. ¶ III.F.1.a. That 

some class members will receive a larger payment than others based on the amount of time 

worked compared to other class members is appropriate in this case and does not constitute 

improper preferential treatment. 

7. Obvious Deficiencies

The Court concludes that the instant motion must be denied based on the following 

deficiencies:

a. Cy Pres Distribution of Unclaimed Funds

The Settlement Agreement provides that funds from unredeemed checks will be paid to the 

State Treasury for the Trial Court Improvement and Modernization Fund and the Equal Access 

Fund of the Judicial Branch. Id. ¶ III.I.11. The parties have not met their burden to show “a 

driving nexus between the plaintiff class and the cy pres beneficiaries.” Dennis v. Kellogg Co., 

697 F.3d 858, 865 (9th Cir. 2012) (citation omitted). The parties should either select a new 

recipient or provide additional support as to why these recipients are appropriate. 

b. Release of Class Members’ Claims

Under the Settlement Agreement, participating class members will release Hoovestol from 

liability as to “all known and unknown state law claims that were alleged or that could have been 

alleged based on the facts of the complaints filed in the matter.” Settlement Agreement ¶ I.BB. 

Terry’s release – which runs “from the beginning of time,” and forever releases all claims by him, 

his spouse, and his heirs – is even broader. ECF No. 55 at 11. “Courts in this district routinely 

reject proposed class action settlement agreements that try to release all claims in a wage-and-hour 

case relating to compensation as overbroad and improper.” Kempen v. Matheson Tri-Gas, Inc., 

No. 15-CV-00660-HSG, 2016 WL 4073336, at *9 (N.D. Cal. Aug. 1, 2016) (citing cases). The 

Court finds that the release in the Settlement Agreement is overbroad and “goes beyond the scope 

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of the present litigation” because it releases all state law claims based on the facts of the complaint 

without regard to the breadth of Plaintiffs’ allegations in the complaint. See Otey v. 

CrowdFlower, Inc., No. 12-CV-05524-JST, 2014 WL 1477630, at *7 (N.D. Cal. Apr. 15, 2014); 

see also McKeen-Chaplin v. Franklin Am. Mortg. Co., No. C 10-5243 SBA, 2012 WL 6629608, at 

*3 (N.D. Cal. Dec. 19, 2012).

8. Notice Procedure

The Court must separately evaluate the proposed notice procedure. Under Federal Rule of 

Civil Procedure 23(c)(2)(B), “the court must direct to class members the best notice that is 

practicable under the circumstances, including individual notice to all members who can be 

identified through reasonable effort.” The notice must state:

(i) the nature of the action; (ii) the definition of the class certified; 

(iii) the class claims, issues, or defenses; (iv) that a class member 

may enter an appearance through an attorney if the member so 

desires; (v) that the court will exclude from the class any member 

who requests exclusion; (vi) the time and manner for requesting 

exclusion; and (vii) the binding effect of a class judgment on 

members under Rule 23(c)(3).

Fed. R. Civ. P. 23(c)(2)(B).

Here, the proposed notice form meets all of the above requirements. Settlement 

Agreement at 29-35. The parties agreed to the appointment of ILYM Group, Inc. as the settlement 

administrator that will handle the provisions of notice. ECF No. 55 at 18. ILYM will mail and 

email the notice form to all identified class members using data provided by Hoovestol. 

Settlement Agreement ¶¶ III.I.3.a, 3.b. ILYM will find a more current address if a notice is 

returned because of an incorrect address. Id. ¶ III.I.3.c. ILYM will also trace the mailing address 

of any notice returned as undeliverable and take note of any notices re-mailed to the original 

address if a new address cannot be found. Id. 

However, Terry’s proposed schedule sets the deadline to opt-out or object to the settlement 

at 45 days after the initial notice is mailed. Id. ¶¶ III.I.4, I.5. “The Court concludes that any 

period shorter than 60 days is too short a time to allow class members to properly respond.” 

Thomas v. Magnachip Semiconductor Inc., No. 14-CV-01160-JST, 2016 WL 1394278, at *8 

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(N.D. Cal. Apr. 7, 2016). Therefore, the Court does not preliminarily approve the notice 

procedure.

CONCLUSION

Plaintiff’s motion is DENIED. The parties may correct the deficiencies noted above and 

re-file their motion for preliminary approval of the class action settlement.3

IT IS SO ORDERED.

Dated: September 7, 2018

______________________________________

JON S. TIGAR

United States District Judge

 

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The Court also notes that the parties plan to pay funds from unredeemed checks to the cy pres

beneficiary after 180 days rather than attempting a second distribution. See Settlement Agreement 

¶ III.I.11. In the re-filed motion, the parties should explain why attempting a second distribution 

would be infeasible or inappropriate. Alternatively, the parties may include a second distribution 

in their agreement.

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