176 Litigating CA Wage & Hour Class and PAGA Actions (23rd Edition) Seyfarth Shaw LLP | www.seyfarth.com Section 384(b) now requires that “any unpaid cash residue or unclaimed or abandoned class member funds shall be distributed in accordance with this section unless for good cause shown the court makes a specific finding that an alternative distribution would better serve the public interest or the interest of the class.” Section 384(b), as amended, would seem to preclude California state judges from approving any settlement that includes a provision whereby residual monies would revert to a defendant, or unclaimed funds would be retained by the defendant. C. Court Scrutiny of the Adequacy of the Settlement Amount Traditionally, if class counsel was an experienced practitioner with a good reputation and the case was settled using an experienced class action mediator, the courts would presume that the settlement amount was fair as the product of an arm’s-length negotiation between sophisticated parties. Indeed, longstanding case law for evaluating class settlements in response to objections from class members that the settlement was inadequate suggested that the court’s inquiry should not go beyond that level of scrutiny.879 Furthermore, it has been a common practice with Labor Code class actions for counsel for the parties to agree early in the action to forego formal discovery and set the action for early mediation. The purpose of this exercise is to minimize expense and bring the matter to a more rapid conclusion. Often, discovery will be informal and limited to disclosing relevant policies, possible contact information for a sample of the proposed class to interview, and enough payroll data to allow the parties to assess potential exposure under whatever theory the plaintiffs advance. Problems may arise, however, when multiple lawyers representing distinct potential class representatives file essentially the same class action against the same defendant and then differ in their view of the value of the case. They may also differ on the propriety of settling the case. As any one of these class representatives could enter into a settlement with the defendant and seek to have the settlement approved, a dissenting class representative may be placed in the position of an objector. Because the law disfavors setting aside a class settlement on the ground that the objector could have obtained an even better class settlement,880 objectors instead argue that the plaintiff failed to undertake the necessary due diligence to properly evaluate the claim. There has never been a requirement that exhaustive formal discovery be undertaken before a class settlement could be affirmed. Rather, the general standard has been that “in the context of class action settlements, formal discovery is not a necessary ticket to the bargaining table where the parties had sufficient information to make an informed decision about settlement.”881 Most courts have generally accepted the sworn statements from counsel that they conducted the necessary investigation and settled the case in mediation and in an arms-length transaction. 879 See, e.g., 7-Eleven Owners for Fair Franchising v. Southland Corp., 85 Cal. App. 4th 1135 (2000). 880 See generally Id. at 1149-50 (noting courts are allowed to look with skepticism on claims from objectors that settlements were inadequate and should have been for more money: “proposed settlement is not to be judged against a hypothetical or speculative measure of what might have been achieved by the negotiators”). 881 Id. at 1149.
RkJQdWJsaXNoZXIy OTkwMTQ4