Court Rejects Lumber Liquidators California Wage Settlement

A federal judge has rejected a negotiated settlement of the California wage class action lawsuit against Lumber Liquidators Inc., saying the incentive award for the lead plaintiff was too large.

Judge Samuel Conti found that the proposed $10,000 award for lead plaintiff Jose Zaldivar was so disproportionate to both the average Class Member’s award and the total value of the California wage and hour settlement, it would compromise Zaldivar’s adequacy as a class representative.

Assistant Manager Alleges Wage and Hour Violations

Zaldivar worked for Lumber Liquidators as an assistant manager at the company’s store in City of Industry, Calif. As an assistant manager, he made an hourly wage and as a “non-exempt” employee he was entitled to overtime pay for excess hours worked. In addition to his hourly wage, he also made a commission, or “sales bonus.”

When Zaldivar filed his California wage and hour class action lawsuit, he alleged Lumber Liquidators violated California labor laws by not accounting for his sales bonuses when calculating his overtime rate. He claimed Lumber Liquidators’ practice violated the California Labor Code, the California Unfair Competition Law, and the federal overtime laws within the Fair Labor Standards Act.

The court then certified a single plaintiff class consisting of all non-exempt Lumber Liquidators employees employed from Sep. 3, 2005, through the present who were paid overtime and were also paid non-discretionary pay or bonuses like Zaldivar’s commission.

Lumber Liquidators Proposed Class Settlement

After going through discovery (the process by which parties to a lawsuit exchange all relevant evidence), the parties negotiated a wage and hour settlement agreement with the assistance of a mediator. With some modification during the mediation, the definition of the plaintiff class ultimately encompassed about 240 current and former Lumber Liquidators employees.

The parties agreed to a total maximum settlement amount of $140,000. From that amount, $42,000 would cover court costs and plaintiffs’ attorneys’ fees; $7,500 would go to the California Labor Workforce Development Agency, pursuant to the California Private Attorney General Act; an estimated $15,000 would cover the costs of claims administration; and an incentive award of up to $10,000 for Zaldivar, who as lead plaintiff represented the plaintiff class.

That breakdown would leave $65,500 to distribute among the class members, making the average payment about $269.

Judge Rejects Lead Plaintiff’s Incentive Award

It was the proposed $10,000 incentive award for Jose that got Judge Conti’s attention. Legally, in considering whether to approve a settlement agreement, the court must consider whether the prospect of a large incentive award for the lead plaintiff could compromise that plaintiff’s ability to represent the interests of the rest of the class.

Judge Conti found that the incentive award was considerably disproportionate to both the size of the overall Lumber Liquidators California wage settlement amount and the average payout for an individual class member, so much so as to make Jose inadequate as a lead plaintiff. He noted the proposed incentive award was more than 37 times the average award for individual class members.

The judge cited research showing that on average, lead plaintiffs’ awards are about sixteen-hundredths of a percent of the total class recovery, with a median of two-hundredths of a percent; in contrast, Jose’s proposed $10,000 award would be about 15 percent of the total $65,500 class recovery.

Judge Conti declined to reduce Jose’s award himself, but suggested that a reasonable award would likely be no more than $5,000.

The Lumber Liquidators California Wage and Hour Class Action Lawsuit is Chavez, et al v. Lumber Liquidators Inc., et al , Case No. CV-09-4812 in the U.S. District Court for the Northern District of California.

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