William Alsup

Class Settlement ‘So Unfair it Can’t Be Fixed’

Getting zero cash in your overtime class action and in exchange agreeing not to sue the boss isn’t exactly a very good deal.  That’s exactly what U.S. District Judge William Alsup thought and he said so in a blistering denial of the settlement deal for Aeropostale West clothing retailer.

“This settlement is so unfair it cannot be fixed,” he said.

The employees who opted-in to join the class “would be better off simply walking away from this lawsuit with their rights to sue still intact,” Alsup said.  “No one should have to give a release and covenant not to sue in exchange for zero (or virtually zero) dollars,” he said.

The lawsuit filed in 2012 alleged that the clothier violated the Fair Labor Standards Act by failing to pay overtime and non-discretionary bonuses to some employees nationwide.

The total amount of the settlement to go to the 594 workers who opted into the class was $8,645, according to Alsup.  Of the 594 employees, 60 percent would receive zero cash, in exchange they must sign a waiver agreeing not to sue the company.

The vast majority of the class would get less than $25, he said.

“This means that the vast majority (ninty percent) of collective-action opt ins would receive nothing in this proposed settlement but nonetheless would provide a release and covenant not to sue,” Alsup said.

The judge was also unhappy that the record was “barren of evidentiary or expert support showing how this proposed settlement could possibly be fair.”

He said the plaintiffs’ Los Angeles lawyers, Joseph R. Becerra, of the Law

Office of Joseph Becerra and Torey J. Favarote from Gleason & Favarote, simply provided two declarations themselves stating the class members “will receive 100% of the amount that each member is owed.”

And the defense did little better, providing an advocacy declaration supporting the deal, rather than an expert report, Alsup said.

The lawyers finally acknowledged that they had no trial-ready damages reports and had negotiated the “settlement framework, in a vacuum, without information about the actual settlement amount.”

They were not even able to tell Alsup how much they would ask a jury to award.

This Takes the Cake.

What really got to Alsup was an additional release that would insulate the defendants, the class representative plaintiff and class lawyers and claims administrator from being sued.  “Parties fail to explain or justify why this additional release is fair and reasonable,” and “would not be disclosed in the proposed notice.”

“This takes the cake,” wrote Alsup. “Not only would most opt ins receive nothing at all, or in some cases, virtually nothing at all, but absent opt ins could not go after their counsel for malpractice in foisting this deal on them,” he said.

And on top of the “conflict of interest,” the deal there would be a “gag order” that prevents plaintiff’s counsel from aiding their clients in submitting objections or exclusion requests over errors in the settlement amount.

He also found a conflict of interest for counsel in an overlap between some members of the federal class who are also part of a state court class action in Los Angeles.

The notice to employees was filled with “legalese” that at no point made clear that 90 percent of the class would get nothing.

“The opt ins would be better off fending for themselves and escaping the negotiating authority of plaintiff’s counsel,” he concluded.

He denied the proposed settlement and told them to be ready to go to trial August 18.

Case: Daniels v. Aeropostale West Inc, No. 12-5755WHA



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