Opinion
2:21-cv-01639 WBS CKD
03-14-2023
DORCAS-COTHY KABASELE, an individual,[1]Plaintiff, v. ULTA SALON, COSMETICS & FRAGRANCE, INC.; and DOES 1-100, inclusive, Defendant.
ORDER
WILLIAM B. SHUBB UNITED STATES DISTRICT JUDGE
A hearing on this unopposed motion for preliminary approval of class settlement was held on March 6, 2023. During oral argument, plaintiff's counsel identified an error in the briefing, which indicated that there were approximately 118,000 putative class members. In actuality, there are approximately 18,000 putative class members. Because the court had based its initial review of the motion on the incorrect assumption of 118,000 class members, the court declined to hear further oral argument at that time. The court now explains its concerns based on the corrected number of class members and the briefing provided thus far.
Plaintiff's counsel's estimate of the maximum possible value of the class claims is $26,379,927. (See Decl. of Robert J. Wasserman (“Wassmerman Decl.”) (Docket No. 34-2) ¶ 13.) Counsel estimates an additional $8,950,000 in PAGA penalties. (Id. ¶ 41.) The combined estimated value of the wage and hour and PAGA claims is $35,329,927. Although counsel explains some of the assumptions used in certain calculations, the figures provided are largely conclusory.
Plaintiff's counsel next discusses defendant's potential arguments and defenses. (See id. ¶¶ 30-38.) Based on the weaknesses of the case, plaintiff's counsel provides a discounted, “realistic” value of the claims. Counsel discounts the minimum wage, overtime, and business reimbursement claims by 50%; and the unpaid meal and rest break premium, wage statement, and waiting time claims by 75%. (Id. ¶ 27.) Counsel's discounted calculations result in a total of $7,474,362 in “realistic” recovery, or 28% of the maximum possible recovery. (See id.) Counsel then makes the leap from $7,474,362 in “realistic” recovery to the gross settlement amount of $1,500,000. Counsel relies on the same explanations, such as they are, relating to defendant's potential defenses and arguments and the risks of litigation, but otherwise does not explain what calculations or reasoning were used to arrive at this figure. (See id. ¶¶ 28, 39.)
The gross settlement amount of $1,500,000 constitutes only 4.2% of the estimated maximum recovery. Even looking solely at the non-PAGA portion of the settlement, the gross settlement amount constitutes 5.5% of the estimated maximum damages for the wage and hour claims. Both percentages are lower than is typically approved, and therefore give the court pause, particularly in light of the conclusory explanations offered by counsel. See Cavazos v. Salas Concrete, Inc., No. 1:19-cv-00062 DAD EPG, 2022 WL 2918361, at *6 (E.D. Cal. July 25, 2022) (collecting cases) (noting that settlement constituting 5.8% of maximum exposure was “below the general range of percentage recoveries that California courts--including this one-have found to be reasonable,” but granting preliminary approval because “a larger recovery . . . would likely not be possible due to defendant's financial condition”); Almanzar v. Home Depot U.S.A., Inc., No. 2:20-cv-0699 KJN, 2022 WL 2817435, at *12 (E.D. Cal. July 19, 2022) (denying preliminary approval because proposed settlement including 8% of projected value of non-PAGA wage and hour claims was below the range typically approved and plaintiff needed to “better explain the reasonableness” of the proposed recovery); Hunt v. VEP Healthcare, Inc., No. 16-cv-04790 VC, 2017 WL 3608297, at *1 (N.D. Cal. Aug. 22, 2017) (denying preliminary approval of settlement constituting 4.3% of maximum possible exposure, noting that “[i]f a defendant is to receive a discount of this magnitude, there must be good reasons why,” which “must be explained thoroughly at the preliminary approval stage . . . to allow the district court to carefully evaluate the strength of the claims, the risks of litigating those claims all the way through, and the value of the relief each class member will receive from the settlement”); O'Connor v. Uber Techs., Inc., 201 F.Supp.3d 1110, 1129, 1132, 1132 n.18, 1135 (N.D. Cal. 2016) (collecting cases) (denying preliminary approval of settlement constituting 5% of the value of all claims and 10% of the value of non-PAGA wage and hour claims, which was on “the low end of reasonable recovery”); Balderas v. Massage Envy Franchising, LLC, No. 12-cv-06327 NC, 2014 WL 3610945, at *5 (N.D. Cal. July 21, 2014) (collecting cases) (because gross settlement amount constituting 8% of the maximum possible recovery was “especially low,” the court stated that counsel needed to provide additional explanation for the settlement amount at final approval).
This figure results from $1,500,000 divided by $35,329,927 .
This figure results from $1,450,000 divided by $26,379,927 .
As counsel has not provided any meaningful explanation or supporting data for his calculation of defendant's maximum possible exposure, the court has no means of evaluating that estimate for purposes of approval. While counsel attempts to explain the reasoning behind counsel's two discounted calculations, counsel does not sufficiently “evaluate the strength or weakness of defendants' positions.” See Eddings v. DS Servs. of Am., Inc., No. 15-cv-02576 VC, 2016 WL 3390477, at *1 (N.D. Cal. May 20, 2016); see also Hunt, 2017 WL 3608297, at *1 (to receive preliminary approval, counsel must provide “careful analysis of the claims and the strength or weakness of any potential defenses”). As such, the court is unable to evaluate whether the steep discounts applied to the claims are reasonable.
“Balancing the class's potential recovery against the amount offered in settlement is perhaps the most important factor to consider in preliminary approval, not a hollow exercise in which the Court blindly accepts the parties' unsupported assertions.'” Beltran v. Olam Spices & Vegetables, Inc., No. 1:18-cv-01676 SAB, 2020 WL 2850211, at *8 (E.D. Cal. June 2, 2020) (quoting Haralson v. U.S. Aviation Servs. Corp., 383 F.Supp.3d 959, 970 (N.D. Cal. 2019)). Accordingly, the court requires more information to assess whether the proposed settlement is fair, reasonable, and adequate for purposes of preliminary approval.
IT IS THEREFORE ORDERED that counsel on both sides shall simultaneously submit supplemental briefing addressing the above concerns on or before April 7, 2023. A further hearing will be held on April 17, 2023 at 1:30 p.m. in Courtroom 5.