United States District Court, D. Colorado
VICTOR DIAZ, on his own behalf and on behalf of all others similarly situated, Plaintiff,
v.
LOST DOG PIZZA, LLC, DANIEL WARREN LYNCH, and JEFF SMOKEVITCH, Defendant.
ORDER GRANTING PRELIMINARY APPROVAL OF SETTLEMENT
AGREEMENT
William J. Martínez, United States District Judge
Plaintiff
Victor Diaz brings this lawsuit against Defendants Lost Dog
Pizza, LLC, Daniel Warren Lynch, and Jeff Smokevitch
(together, “Defendants”) alleging nonpayment of
overtime to workers at Lost Dog Pizza d/b/a Brown Dog Pizza,
a restaurant in Telluride, Colorado, in violation of the
Colorado Minimum Wage Act, C.R.S. §§ 8-6-101 et
seq., and the Fair Labor Standards Act
(“FLSA”), 29 U.S.C. §§ 201 et
seq. (ECF No. 1.) Plaintiff, on behalf of himself and
those similarly situated, and Defendants jointly ask the
Court to preliminarily approve their proposed settlement of
class and FLSA claims, to approve a proposed Rule 23 class
notice, and set a final fairness hearing and related
deadlines. (ECF No. 28.)
The
Court has reviewed and considered the parties' joint
motion and, having reviewed the proposed settlement and being
fully advised, will grant the parties' motion.
“The
purpose of the preliminary approval process is to determine
whether there is any reason not to notify the class members
of the proposed settlement and to proceed with a fairness
hearing.” Lucas v. Kmart Corp., 234 F.R.D.
688, 693 (D. Colo. 2006). “[T]he standard that governs
the preliminary approval inquiry is less demanding than the
standard that applies at the final approval stage.”
Rhodes v. Olson Assocs., P.C., 308 F.R.D. 664, 666
(D. Colo. 2015) (internal quotation marks omitted). A
proposed settlement should be preliminarily approved if it
“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 [judicial] approval.” William B.
Rubenstein, Newberg on Class Actions § 13:10
(5th ed., Nov. 2018 update) (internal quotation marks
omitted).
As
drafted and presented to the Court, the proposed settlement
agreement appears to be the product of serious negotiations,
has no obvious deficiencies, does not grant improper
preferential treatment to the class representatives, and
generally falls within the range of possible judicial
approval. See id.
The
proposed settlement agreement also contains a cy
pres provision that would distribute unclaimed funds to
a third party were the Court to finally approve the proposed
settlement agreement. (ECF No. 37 at 8.) Because cy
pres awards are not frequently used in class actions
within the District of Colorado, the Court will address at
this time whether the cy pres award provision is
“fair, reasonable, and adequate.” (Id.)
See also Fed. R. Civ. P. 23(e)(2).
There
are two types of cy pres awards to third parties in
class action settlements: (1) all settlement funds go to
third-party organizations working on issues related to the
underlying dispute instead of class members[1] and (2) unclaimed
funds go to third-party organizations. See In re Google
Referrer Header Privacy Litig., 869 F.3d 737, 742 (9th
Cir. 2017), cert. granted sub nom. Frank v. Gaos,
138 S.Ct. 1697 (2018); Tennille v. W. Union Co., 809
F.3d 555, 560 n.2 (10th Cir. 2015). The Tenth Circuit has
recognized that the cy pres doctrine in class action
settlements “allows a court to distribute unclaimed or
non-distributable portions of a class action settlement fund
to the ‘next best' class of beneficiaries, ”
but has not otherwise expounded on the doctrine.
Tennille, 809 F.3d at 560 n.2 (quoting Nachshin
v. AOL, LLC, 663 F.3d 1034, 1036 (9th Cir. 2011)).
District
courts within the Tenth Circuit have approved cy
pres awards to third-party beneficiaries in class action
settlements. See In re Crocs, Inc. Sec. Litig., 2013
WL 4547404, at *5 (D. Colo. Aug. 28, 2013); Childs v.
Unified Life Ins. Co., 2012 WL 13018913, at *5 (N.D.
Okla. Aug. 21, 2012). A cy pres award is appropriate
“only if the beneficiary is the next best use for
indirect class benefit” and the “cy pres
beneficiary . . . [is] related to the nature of a
plaintiff's claims.” Bailes v. Lineage
Logistics, LLC, 2016 WL 4415356, at *7 (D. Kan. Aug. 19,
2016) (internal quotation marks omitted and alterations
incorporated). But see In re Crocs, 2013 WL 4547404,
at *5 (preliminarily approving cy pres provision
that awarded unallocated funds to an charitable organization
with no immediately discernable ties to the purpose of the
lawsuit). Courts also evaluate whether beneficiaries are
“carefully chosen to account for the nature of the
lawsuit, the objectives of the underlying statutes, and the
interests of silent class members, including their geographic
diversity.” In re Motor Fuel Temperature Sales
Practices Litig., 286 F.R.D. 488, 504 (D. Kan. 2012).
Courts have rejected cy pres awards when the parties
failed to identify a proposed beneficiary, or when the
beneficiary was “so unrelated to the claims” in
the case that the class members would not benefit. Better
v. YRC Worldwide Inc., 2013 WL 6060952, at *6 (D. Kan.
Nov. 18, 2013); Bailes, 2016 WL 4415356, at *7.
The
parties' joint proposal includes a cy pres
provision that provides that any settlement checks not
negotiated within 90 days of issuance will be deemed
“unclaimed funds” and forwarded by the class
administrator to the Tri County Health Network, a Section
501(c)(3) organization based in Southwestern Colorado. (ECF
No. 37-1 at 8.) In supplemental briefing requested by the
Court, Plaintiff explains that the Tri-County Health Network
provides workers' rights services to the immigrant
community in Telluride, Colorado (where the pizzeria is
located). (ECF No. 39 at 1.) Specifically, Tri-County Health
Network conducts workers' rights workshops for immigrant
laborers who work in the service industry in the area and
assist individual immigrant workers with work-related
disputes. (Id.) The organization recently received a
grant from the Colorado Bar Association to provide
translation and interpretation services to aid local lawyers
and Spanish-speaking immigrant workers. (Id. at 2.)
The
Court is satisfied that the proposed cy pres award
is the “next best use for indirect class benefit”
for unclaimed settlement funds. See Bailes, 2016 WL
4415356, at *7. The allegations that form the basis for this
lawsuit took place at a pizza restaurant in Telluride by
“low-wage immigrant workers.” (ECF No. 37 at 4
n.1.) The Tri-County Health Network provides resources and
support for individuals in the same community as those who
seek to vindicate their claims through this class action. The
Court thus preliminarily finds that the cy pres
award is fair, reasonable, and adequate.
The
Court hereby FINDS and ORDERS as follows:
1. The
Joint Motion for Preliminary Approval of Class and Collective
Action Settlement (ECF No. 37) is GRANTED; 2. The Settlement
Agreement (ECF No. 37-1) is PRELIMINARILY APPROVED as fair
and reasonable.
3. The
form and contents of notice to be given to the Class is
APPROVED AS MODIFIED. A redline version (ECF No. 40-1) and
clean version (ECF No. 40-2) of the Court-approved notice are
attached to this Order.
4. The
Settlement Administrator shall complete distribution of the
Court-approved notice, in both English and Spanish, to ...