Zayas v. San Francisco Sheriff's Department

[3] 4 UNITED STATES DISTRICT COURT 5 NORTHERN DISTRICT OF CALIFORNIA [6] CANDIDO ZAYAS, et al., 7 Case No. 18-cv-06155-JCS Plaintiffs, 8 Related Case Nos. 18-cv-04857-JCS v. (“Taylor”) and 18-cv-04890-JCS 9 (“Johnson”) SAN FRANCISCO SHERIFF'S 10 DEPARTMENT, et al., ORDER DENYING RENEWED MOTION FOR PRELIMINARY 11 Defendants. APPROVAL OF CLASS ACTION SETTLEMENT WITHOUT 12 PREJUDICE 13 Re: Dkt. No. 86 [14] 15 I. INTRODUCTION 16 Presently before the Court is the parties’ Joint Motion for Preliminary Approval of Class 17 Action Settlement (Dkt. No. 86) (hereinafter, “Renewed Motion for Approval”). This is the 18 parties’ second request for preliminary approval of a class action settlement in this case. The 19 Court denied the first such motion (Dkt. No. 68) (hereinafter, “Initial Motion for Approval”) on 20 the basis that the San Francisco Board of Supervisors (“Board of Supervisors”) had not approved 21 the settlement agreement and therefore the motion was premature. At the May 29, 2020 motion 22 hearing, the Court also identified a number of deficiencies in the settlement agreement, one of 23 which was that its terms were not fully set forth in a single document. Instead, the parties pointed 24 to the Full and Final Release that had been signed by the named Plaintiffs, agreeing to release their 25 claims against the City and County of San Francisco (“the City”) in return for a payment to the 26 class of $2.1 million, with other terms of the agreement contained only in the parties’ motion 27 papers. 1 during which the parties have addressed possible approaches to settling all three of the related 2 cases, Zayas (a putative class action), Johnson (a multi-plaintiff case) and Taylor (a single plaintiff 3 action in which the plaintiff was initially unrepresented but is now represented by counsel for the 4 Zayas plaintiffs). The parties have agreed that the Johnson and Taylor cases will be dismissed 5 and that the plaintiffs in those case will become members of the Zayas class. Thus, the Court 6 intends to dismiss those cases without prejudice when it grants preliminary approval of the 7 settlement agreement in Zayas, conditional upon the Court entering final approval of the 8 settlement within an appropriate time period. The Court is unable, however, to grant preliminary 9 approval to the settlement agreement that has been presented with the Renewed Motion for 10 Approval, see Renewed Motion for Approval, Ex. A (“Settlement Agreement”), because of its 11 many deficiencies, addressed below. 12 II. ANALYSIS 13 A. Legal Standard 14 Federal Rule of Civil Procedure 23(e) requires judicial approval of any settlement by 15 a certified class. Although there is a “strong judicial policy that favors settlements, 16 particularly where complex class action litigation is concerned,” Linney v. Cellular Alaska 17 P’ship, 151 F.3d 1234 , 1238 (9th Cir. 1998), “[t]he purpose of Rule 23(e) is to protect the 18 unnamed members of the class from unjust or unfair settlements affecting their rights,” In re 19 Syncor ERISA Litig., 516 F.3d 1095, 1100 (9th Cir. 2008). Accordingly, a settlement 20 should only be approved if it is “fundamentally fair, adequate, and reasonable.” Torrisi v. 21 Tucson Elec. Power Co., 8 F.3d 1370 , 1375 (9th Cir. 1993) (internal quotation marks 22 omitted). In determining whether the proposed settlement meets this standard, the Court 23 does not have the ability “to delete, modify, or substitute certain provisions . . . . The 24 settlement must stand or fall in its entirety.” Id. Due to the dangers of collusion between 25 class counsel and the defendant, as well as the need for additional protections when the 26 settlement is not negotiated by a court-designated class representative, settlement approval 27 that takes place prior to formal class certification requires a higher standard of fairness. 1 “The Court may grant preliminary approval of a settlement and direct notice to the 2 class if the settlement: (1) appears to be the product of serious, informed, non-collusive 3 negotiations; (2) has no obvious deficiencies; (3) does not improperly grant preferential 4 treatment to class representatives or segments of the class; and (4) falls within the range of 5 possible approval.” Harris v. Vector Mktg. Corp., No. 08-cv-05198 EMC, 2011 WL 6 1627973, at *7 (N.D. Cal. Apr. 29, 2011); In re Tableware Antitrust Litig., 484 F. Supp. 2d 7 1078, 1079 (N.D. Cal. 2007). 8 B. Discussion 9 The parties have been engaging in serious, informed and non-collusive negotiations for 10 over a year in order to reach a settlement in this case, and the general terms of the agreement (to 11 the extent the Court can determine what those terms are from the papers that have been filed to 12 date) appear to be within the range of possible approval. In particular, the overall amount of the 13 settlement appears to fall in the range of what is reasonable in light of the factual and legal issues 14 raised in the case and the size of the class. There is much, however, that is unclear in the 15 Settlement Agreement, or that appears to be inconsistent with the agreement that the parties have 16 described in their papers and to the Court. As the parties have represented that they are interested 17 in revising the agreement to obtain the Court’s approval, the Court identifies these problems 18 below. 19 1. Problems With Terms of the Agreement 20 Settlement Class Definition: The Settlement Agreement contains multiple definitions of 21 the class and they are inconsistent. Paragraph 14 states that the parties “stipulate to certification of 22 the following class for purposes of settlement: All inmates who were housed in San Francisco 23 County Jail 4, located at 850 Bryant Street, who were housed Housing Blocks A, B, or C, in a cell 24 that was impacted by the sewage overflows which took place between January 3, 2017 and 25 September 15, 2018.” Paragraph 6 states that “[t]he class is defined as all inmates who suffered 26 a direct or indirect impact from the sewage overflows while housed at County Jail 4, located at 27 850 Bryant Street during the period of January 3, 2017 to September 30, 2018.” Paragraph 27 1 were housed in San Francisco County Jail 4, located at 850 Bryant Street, who were housed 2 Housing Blocks A, B, or C, in a cell that was impacted by the sewage overflows which took place 3 between January 3, 2017 and September 15, 2018, and have not filed individual claims.” In 4 addition to the inconsistent end-dates, the condition included in Paragraph 27 appears to exclude 5 the plaintiffs in Taylor and Johnson, contrary to the intentions stated by counsel in their papers 6 and in open Court. The parties need to agree on a single definition of the class definition that 7 accurately reflects their agreements as to the handling of the Johnson and Taylor cases. In 8 defining the classes, counsel should keep in mind that the Court will only grant preliminary 9 approval of the class action settlement if it determines that the settlement class can be certified 10 under Rule 23. 11 Procedure for Establishing Class Membership: Closely related to the insufficient class 12 definition is the fact that the Settlement Agreement does not include a mechanism for determining 13 class membership or allowing putative class members to challenge determinations as to whether or 14 not they are class members. The Court notes that counsel for the Johnson plaintiffs has stipulated 15 that based on the data provided by the City, “a total of 135 out of the 213 named Johnson plaintiffs 16 were inmates in County Jail 4 [and] were negatively impacted by sewage.” Docket No. 84 17 (“Stipulation”) at 8. In other words, 78 of those individuals apparently believe they were 18 negatively impacted but do not show up in the records that have been produced by the City. It is 19 not clear how such individuals will be treated under the Settlement Agreement or what recourse 20 they will have (if any) if they are determined to be outside of the settlement class based on the 21 records that have been provided by the City. As Zayas counsel has noted, word of mouth and 22 planned outreach efforts will likely result in significant interest on the part of putative class 23 members in the Settlement Agreement. It is particularly important, therefore, that the Settlement 24 Agreement provide a clear definition of the settlement class and a fair and efficient mechanism for 25 resolving disputes that may arise as to whether these individuals are entitled to receive a share of 26 the settlement. 27 Contingency Provision (Paragraph 11): Paragraph 11 of the Settlement Agreement 1 Supervisors has already approved the settlement, this provision appears to be superfluous. 2 Description of Payout Amounts: Paragraph 55 purports to describe the amounts class 3 members in the three subclasses will receive under the Settlement Agreement but does not offer a 4 clear explanation of how each class member’s share of the settlement proceeds will be calculated. 5 First, it describes a flat-rate calculation that will be awarded to class members based on the 6 number of days of exposure, type of exposure (direct or indirect) and whether they filed 7 grievances but then goes on to state that class members will receive a pro rata share of the 8 settlement. As described, these two methods of calculating the amount each class member will 9 receive are not consistent. Second, the section states that attorneys’ fees and costs will be 10 deducted from the recovery of members of Subclasses A and B but does not state how each class 11 member’s share of fees and costs will be calculated. Third, the per-incident amount stated in the 12 Settlement Agreement for Subclass C members ($5.15.12) is likely to confuse class members and 13 should be stated in dollars and cents only. Finally, the meaning of Paragraph 55(d), providing for a 14 $15 “check waiver” is unclear. The parties explained at the motion hearing that this provision is 15 aimed at the second round of checks to be distributed to class members. If the parties wish to 16 include this provision in the amended settlement agreement, they need to revise it to make clear 17 what it means. As written, the Court cannot determine whether this provision is reasonable. 18 In order to address the problems identified above, the parties need to provide a clear and 19 complete description of how each class member’s payment amount will be calculated, including 20 how their share of any deduction for attorneys’ fees and costs will be calculated. To the extent 21 that the parties envision two rounds of payments to class members, the amended settlement 22 agreement must describe the method that will be used to calculate the amount for each round. 23 Finally, as discussed above in connection with class membership, the Settlement Agreement must 24 include a mechanism that will allow class members to challenge the accuracy of these calculations 25 and to have those challenges resolved promptly and efficiently. 26 The Attorneys’ Fees Provision: Paragraph 84 of the Settlement Agreement states, in part, 27 as follows: “The parties agree to request that the Court approve attorneys fees not to exceed 33% 1 Huang and 50% of the attorneys fees jointly going to attorneys Stanley Goff and Fulvio Cajina.” 2 While this provision falls within the range of possible approval, it is not consistent with statements 3 elsewhere in the parties’ papers suggesting that they agreed to request total attorneys’ fees in the 4 amount of $660,000, which is 31.4% of the total settlement amount and not 33% as stated in the 5 Settlement Agreement. See Renewed Motion for Approval at 22; Gough Decl. iso Renewed 6 Motion for Approval ¶ 5. In other words, it is not clear that the parties have agreed to the 7 percentage stated in the Settlement Agreement. 8 References to Claims: Although the parties have agreed that it will not be necessary for 9 class members to file claims to participate in the settlement, Paragraph 24 of the Settlement 10 Agreement defines “Approved Claim” as “a claim submitted no later than the Bar Date by a Class 11 member.” This provision is not consistent with the parties’ agreement. (The Court notes that the 12 proposed notice also incorrectly states that class members must submit a timely and valid claim to 13 receive payment. Huang Decl. iso Renewed Motion for Preliminary Approval, Ex. A, § 4.7). 14 Release of Class Member Claims: The release for class representatives is found in 15 Paragraph 98 of the Settlement Agreement. Paragraphs 90 and 91 also include a waiver of 16 California Civil Code section 1542 by class representatives. The Settlement Agreement does not 17 appear to include a release for absent class members, however, despite the statement in the 18 Renewed Motion for Approval stating that “[t]he Claims To be Released include all claims by the 19 class members, which are defined to include the inmates housed in Cell Blocks A, B and C of the 20 former County Jail 4.” Renewed Motion for Approval at 20. When the Court asked the parties at 21 the motion hearing to point to a release in the Settlement Agreement that covers the absent class 22 members (as opposed to the class representatives), they were unable to do so. Based on the 23 history of this case, it is clear that the agreement that was approved by the Board of Supervisors 24 included a release that would cover all class members who do not opt out of the class. The 25 omission of such a release from the Settlement Agreement appears to have been an error. 26 Inadequate Protections for Class Members: As has been the subject of extensive 27 discussion between counsel and the Court, the nature of the class in this case has made it difficult 1 and have been transferred from one prison to another since these cases were filed; other class 2 members are no longer incarcerated but may not have a stable address or live at an address that is 3 different from the one that is on record with the City. This problem was highlighted when 4 numerous individuals who had asked to be plaintiffs in the Johnson case could not be found when 5 it came time to obtain signed releases in connection with the proposed settlement agreement. In 6 light of these difficulties, and the likelihood that a significant portion of the class will not receive 7 prompt notice despite the efforts of Plaintiffs’ counsel and the claims administrator to find them, 8 the Court concludes that the Settlement Agreement must include special protections for class 9 members who receive late notice of the settlement. In particular, the Settlement Agreement should 10 include a reserve fund for class members who do not learn of the Settlement Agreement until after 11 the initial round of payments has been made. The parties should also consider allowing class 12 members more than six months to cash their checks. Finally, the timing of any additional 13 disbursements of settlement funds after the initial round of payments should take into account the 14 need to protect class members who receive late notice of the settlement agreement. 15 2. Claims Administrator 16 The Court continues to have grave concerns (also expressed at the May 29, 2020 motion 17 hearing) as to whether the proposed claims administrator, Greenfire Law, is qualified to administer 18 the parties’ settlement agreement. Despite the concerns that were expressed by the Court at the 19 previous motion hearing, the claims administrator has not offered any additional information 20 suggesting that it has ever administered a class action – much less one as complicated as the one 21 here – or that it has the expertise to do so. Counsel represented to the Court that experienced 22 claims administrators were not interested in taking on the job because of the special challenges 23 that administering the settlement agreement in this case presents. It is for this very reason, 24 however, that it is essential that Plaintiffs retain a claims administrator with the experience 25 required to meet these challenges, even if doing so may increase the cost of claims 26 administration.1 At the hearing, counsel agreed to make further efforts to find an experienced [27] 1 settlement administrator. 2 3. Class Notice 3 When the parties revise the Settlement Agreement, they must also draft a revised notice 4 that accurately reflects the terms of the amended settlement agreement. In addition, a number of 5 deficiencies in the current proposed notice need to be corrected. First, as discussed at both the 6 May 29, 2020 and January 15, 2021 motion hearings, in order to give class members sufficient 7 notice to decide whether or not to opt out of the class, the notices that are mailed and/or emailed to 8 individual class members should include not only an explanation of how class member payment 9 amounts will be determined but also the estimated dollar amount that each class member will 10 receive under the settlement agreement on the first round of payments, including: 1) an estimate of 11 the amount each class member will receive based on the number of incidents of exposure and 12 whether they filed a grievance; and 2) an estimate of the amount that will be deducted for 13 attorneys’ fees and administrative costs, if applicable. The members should also be informed that 14 there may be a second round of payments, although the notice need not provide an estimated 15 dollar amount as to the second payment. Likewise, the notice does not need to include the dollar 16 amount of any deduction that will be taken out of a class member’s payment for restitution. 17 However, the notice must make clear that any restitution that the Office of Victim and Survivor 18 Rights determines a class member owes will be deducted from the class member’s payment. In 19 addition, the notice should provide the overall dollar amounts that will be requested for attorneys’ 20 fees and administrative costs consistent with the terms of the settlement agreement. Finally, the 21 notice must explain how individuals can challenge determinations about whether they are 22 members of the class and the calculation of the individual amount they will receive. 23 The notice must also accurately describe any release of class member claims that will 24 result from remaining in the class rather than opting out. The Court notes that the current 25 proposed notice quotes sections described as 10.1 and 10.2 that purport to be the releases in this 26 case, but the Settlement Agreement attached to the Renewed Motion for Approval does not 27 contain such sections. 1 members will need to file a simple claim form, but the parties have agreed that the Settlement 2 Agreement will not require class members to file claims (as is accurately reflected on page 6 of the 3 proposed notice, where class members are informed that they will automatically receive a check if 4 they don’t opt out of the class). This section should be revised or removed. 5 The proposed notice includes a statement that the Clerk’s Office is open from 9 a.m. and 6 4:00 p.m. As the Clerk’s Office is not currently open to the public due to the public health 7 emergency and it is unclear when the Clerk’s Office will be open to the public, this statement 8 should be removed from the proposed notice. 9 Section 1.8 of the proposed notice states that the Court’s Order Certifying the Class will be 10 posted on the case website. This statement is likely to cause confusion as there will be no order 11 with that title; rather there will be an order granting preliminary approval of the class action 12 settlement and an order granting final approval, each of which will address whether the settlement 13 class is certifiable. To avoid confusion, the proposed notice should leave a blank for the title of 14 order it seeks to reference, which can be filled in with the exact title of the Court’s order once it 15 has been filed. 16 Section 3.1 of the proposed notice states that the amount class members will receive will 17 be calculated “as follows” but does not go on to describe how the amounts will be calculated. As 18 discussed above, the notice must contain a clear explanation of how class member shares are to be 19 calculated as well as an estimate of the dollar amount each class member will receive on the first 20 round of payments. 21 The Court also finds that the notice must be in both English and Spanish in order to ensure 22 the best notice practicable under Rule 23. The parties do not dispute that many class members 23 speak Spanish as their primary language. As class notice must be given “in a manner that does not 24 systematically leave any group without notice,” Officers for Justice v. Civil Serv. Comm’n of City 25 & Cty. of San Francisco, 688 F.2d 615, 624 (9th Cir. 1982), these members should receive their 26 notice in Spanish. (Similarly, the telephone hotline for the case should make provision for callers 27 who need to speak to Spanish-speaking operators to answer their questions.) 1 4. Schedule for Final Approval 2 When the parties submit a proposed schedule for obtaining final approval of their amended 3 settlement agreement, they should include deadlines for individuals to challenge determinations as 4 || to class membership and payment amounts. They should also include in the schedule a motion for 5 attorneys’ fees and costs (which must be filed at least thirty days before the deadline to opt out of 6 || the class). (The motion for final approval may be filed after the opt-out deadline as the number of 7 || opt-outs is one of the factors the Court will consider in determining whether to approve the 8 settlement agreement). 9 || Il. CONCLUSION 10 For the reasons stated above, the Renewed Motion for Approval is DENIED without 11 prejudice. 12 IT IS SO ORDERED. 14 || Dated: January 18, 2021 Zz [15] 2 JQSEPH C. SPERO A 16 ief Magistrate Judge [17] Z 18