Court of Appeal Clarifies Standard for Approving Class Settlement

In Munoz v. BCI Coca-Cola Bottling Company of Los Angeles (June 10, 2010, publication ordered July 2, 2010) --- Cal.App.4th ---, the plaintiffs filed a putative class action alleging various wage and hour violations stemming from the defendant's mis-classification of the putative class members as exempt employees. The parties entered into a $1.1 million claims-made settlement, with attorney fees of 30%. After notice, two class members opted out, and 172 filed valid claims, resulting in an average distribution of $4,300 per class member.

One class member objected. Citing Kullar v. Foot Locker Retail, Inc. (2008) 168 Cal.App.4th 116, and Clark v. American Residential Services LLC (2009) 175 Cal.App.4th 785, both of which found the trial court had abused its discretion in approving a class action settlement, he argued that the release given to the employer was overly broad, the parties failed to provide the total potential value of the claims being released, the settlement sum was “relatively low," there was “a lack of meaningful pre-trial discovery,” making it difficult to intelligently evaluate the value of the claims and compare it to the settlement amount, and the notice did not provide sufficient information to allow class members to calculate how much they could expect to receive for their claims. The trial court rejected these arguments and approved the settlement, and the objector appealed.

The Court of Appeal affirmed. It found that the plaintiffs had given the trial court sufficient information to determine the "realistic range of outcomes of the litigation:"

Greenwell misunderstands Kullar, apparently interpreting it to require the record in all cases to contain evidence in the form of an explicit statement of the maximum amount the plaintiff class could recover if it prevailed on all its claims - a number which appears nowhere in the record of this case. But Kullar does not, as Greenwell claims, require any such explicit statement of value; it requires a record which allows “an understanding of the amount that is in controversy and the realistic range of outcomes of the litigation.” (Kullar, supra, 168 Cal.App.4th at p. 120, 85 Cal.Rptr.3d 20.) That record exists in this case.

Slip op. at 6. The Court then distinguished Kullar and Clark:

As a final observation on this topic, we note that the evidentiary records in Kullar and Clark, upon which Greenwell relies so heavily, are significantly different from this case. In Kullar (which did not involve the misclassification of exempt employees), there was no discovery at all on meal period claims that were added in an amended complaint and were the focal point of the objections to the settlement. (Kullar, supra, 168 Cal.App.4th at pp. 121-122, 85 Cal.Rptr.3d 20.) While Kullar class counsel argued that the relevant information had been exchanged informally and during mediation (id. at p. 126, 85 Cal.Rptr.3d 20), nothing was presented to the court - no discovery, no declarations, no time records, no payroll data, nothing (id. at pp. 128-129, 132, 85 Cal.Rptr.3d 20) - to allow the court to evaluate the claim. And in Clark, the problem was that the trial court was not given sufficient information on a core legal issue affecting the strength of the plaintiffs' case on the merits, and therefore could not assess the reasonableness of the settlement terms. (Clark, supra, 175 Cal.App.4th at p. 798, 96 Cal.Rptr.3d 441.) The record in this case contains neither of the flaws that doomed the Kullar and Clark settlements.

In sum, we can see no basis for finding an abuse of discretion. As we have seen, the record contains sufficient information from which the trial court could gain an adequate understanding of the amount in controversy, and there was likewise considerable information from which to assess the strength of the class claims and the risks and expense of litigating them. The question whether the class could be certified, based on the substantial differences in individual circumstances, was a significant one. The uncertain state of the law with respect to meal and rest period claims was likewise a substantial concern. And the “ ‘reaction of the class members to the proposed settlement’ “ (Kullar, supra, 168 Cal.App.4th at p. 128, 85 Cal.Rptr.3d 20) was favorable, with only two opt-outs and one objection. Under these circumstances, the trial court's observations - that the class “may not be certifiable,” that “it would be extremely difficult to try this case,” and that $4,300 for each member of the class was “as good a deal as you can get” - were fully supported by the record.

Slip op. at 7. Munoz seems put Kullar and Clark in proper perspective.