C.D.Cal.: Motion for Corrective Action Granted Where Defendant Provided Insufficient Info to Putative Class Members When Obtaining Releases

Gonzalez v. Preferred Freezer Services LBF, LLC

This case was before the court on the plaintiff’s motion for corrective action, under Federal Rules of Civil Procedure 23, on grounds that the defendant had improperly contacted potential plaintiffs to this putative class action in efforts ‘to obtain releases from its employees concerning the claims pled by [Gonzalez] in this action.’ The plaintiff sought an order requiring the defendant to release the names and contact information of individuals from whom the defendant had attempted to extract releases. The court granted the plaintiff’s motion, applying Rule 23’s protections to an FLSA case.

The court described the relevant facts/procedural history as follows:

Gonzalez brought a collective action on behalf of himself and other of Preferred Freezer’s employees for unpaid overtime pay under California law and the Fair Labor Standards Act, 29 U.S.C. § 216(b). (Mot.2.) In August 2012, Preferred Freezer unilaterally drafted a “Release Agreement” that it provided to its employees, who are potential plaintiffs to this putative class action. (Mot.6–7.) The Agreement explained that in exchange for a settlement payment “in full satisfaction of all claims that Employee has, had or could have had arising out of the lawsuit or in any way related thereto,” the employee waived any and all claims arising out of a “former employee[‘s]” wage-and-hour lawsuit or in any way related to the lawsuit. (Mot.7.) But the Release Agreement did not state when this unnamed lawsuit was filed, the name of the former employee, the names of the employee’s attorneys, the attorneys’ contact information, or the period of time covered by the release. (Id.)

The court explained that the plaintiff learned of the defendant’s actions that were the subject of the motion, when a putative class member who had been approached by the defendant contacted plaintiff’s counsel. After discussing the general concept that settlements are favored, the court explained how the manner in which the defendant obtained the general releases here was misleading:

The waiver Preferred Freezer tendered its employees was misleading in many ways. It did not include any information regarding this class action, except that a former employee had brought a lawsuit against Preferred Freezer. (Sinay Decl. Exs. A, B.) The waiver did not attach the Complaint, any information on when the case was filed, nor any information regarding the essence of the case. (Mot.7.) Preferred Freezer also did not include Gonzalez’s counsel’s contact information. (See Gamez Decl. Ex. 1.) Even when Preferred Freezer’s agents spoke to the potential plaintiffs, the agents never provided them with the name of the case. (Gamez Decl. ¶ 6.) Furthermore, Preferred Freezer’s counsel never contacted Gonzalez’s counsel to confer over possible communication to Preferred Freezer’s employees regarding the potential settlement. (Mot.6.) Thus, the waiver misleadingly failed to provide the potential plaintiffs with adequate notice of this case in order to make an informed decision regarding waiver of their rights.

While the facts surrounding the manner in which the defendant had obtained the releases were uncontested, the defendant argued that corrective action was inappropriate and that: (1) defendant’s first amendment right to communicate with the putative class should not be hindered; (2) putative class members of a 216(b) collective actions are not entitled to the same protections as those in a Rule 23 class action; (3) the DOL supervised the settlements at issue; and (4) they did provide enough information to the settling class members, so as to alleviate concerns that the releases were obtained based on misleading information.

Noting that the plaintiff was not seeking to invalidate the releases at this juncture, and was not seeking to stop the defendant from communicating with putative class members, the court granted the plaintiff’s motion. The court granted the plaintiff’s motion as follows:

In response to Preferred Freezer’s misleading contact with putative class members in this action, Gonzalez asks that the Court orders Preferred Freezer to provide names, addresses, and telephone numbers for each and every person contacted by Preferred Freezer regarding the waiver. (Mot.25.) Gonzalez also requests that any communication to potential plaintiffs should include all the important information relating to Gonzalez’s case. (Mot.24.) For the reasons discussed above, the Court finds this request reasonable and therefore GRANTS Gonzalez’s motion.

Preferred Freezer is therefore ORDERED to provide Gonzalez with the contact information of all of those prospective plaintiffs in this case with whom Preferred Freezer has had contact regarding settlement. Furthermore, any communication that either party has with putative plaintiffs must include the following information: (1) the name of this case; (2) the case number; (3) a summary of the basis of Gonzalez’s claims; (4) the name of Gonzalez’s attorneys and their contact information; and (5) a statement concerning the effect of executing Preferred Freezer’s released documents will have on its employees’ ability to participate in this lawsuit.

Click Gonzalez v. Preferred Freezer Services LBF, LLC to read the entire Order Granting Plaintiff’s Motion for an Order for Corrective Action.

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Filed under Collective Actions, Pre-Certification Communications

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