Harsh Words for Counsel Behind Aeropostale Deal

(CN) - A proposed settlement that gives Aeropostale workers little or nothing in return for waiving their right to sue the retailer is "so unfair that it cannot be fixed," a federal judge ruled.

Given the multiple problems with the deal, employees who opted into the litigation "would be better off fending for themselves and escaping the negotiating authority of plaintiff's counsel," according to the scathing 12-page opinion from U.S. District Judge William Alsup in San Francisco.

Aeropostale, a national retailer of casual apparel and accessories, faces at least three pending actions involving alleged violations of the federal Fair Labor Standards Act.

The plaintiffs in all three cases are represented by Joseph Becerra, of the Law Office of Joseph R. Becerra, and Torey J. Favarote, of Gleason & Favartote LLP, both located in Los Angeles.

Los Angeles Superior Court Judge Richard Fruin approved a $1.5 million settlement of one case, Sankey v. Aéropostale, earlier this year, but the action is currently stayed pending an appeal over attorneys' fees.

Around the same time, Judge John Shepard Wiley Jr. in Los Angeles Superior Court approved a $2.1 million settlement in Pakaz, et al, v. Aéropostale West. That deal also requires the retailer to restore the equivalent of $800,000 in vacation and personal day credits to current employee accounts.

Alsup meanwhile is presiding over a case led by Portia Daniels over the failure to include nondiscretionary bonus amount in the pay for non-exempt Aeropostale employees.

He noted last week that 594 individuals opted into the litigation, but that attorneys have reported that the current "true up amount" was $8,645.61.

Alsup said he was taken aback to learn "sixty percent of all collective-action opt-in members would give a release and covenant not to sue but would receive absolutely nothing."

To make matters worse, an analysis of what the remaining opt-in members would receive revealed that "the vast majority (ninety percent) of the collective-action opt ins would receive nothing or virtually nothing in this proposed settlement but nonetheless would provide a release and covenant not to sue."

"No one should have to give a release and covenant not to sue in exchange for zero (or virtually zero) dollars," Alsup wrote. "The collective-action opt ins would be better off simply walking away from this lawsuit with their rights to sue still intact.

"It is no answer to say they deserve nothing so no harm is done in extracting the release and covenant. The opt ins presumably thing they deserve something - otherwise they would not have opted in. To protect the absent opt-in members, they will not be required to give up their claims in exchange for zero dollars."

The record "is also barren of evidentiary or expert support showing how this proposed settlement could possibly be fair," the court found. Alsup bristled as well when counsel offered "the excuse that they negotiated the 'settlement framework' in a vacuum, without information about the actual settlement amount."

Alsup said his direct questions about what class counsel would seek as a damages award from a jury yielded only vague responses. The lawyers also did even not have specific information about the overtime hours the employees worked or the nondiscretionary bonuses paid, according to the ruling.

In addition to overbroad release of claims in the proposed settlement, Alsup said he was more astounded by an "additional release" that would also insulate "defendants ... the released parties, representative plaintiff, other settlement collective action members, collective action counsel, defendants' counsel, [and] the claims administrator" from "any claim ... based on distributions or payments made in accordance with the settlement agreement."

"This takes the cake," Alsup wrote. "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 upon them."

A gag-order written into the deal would furthermore prevent parties and counsel from seeking, soliciting or otherwise encourage the class action members to submit objections, exclusion requests or appeals regarding the agreement, he found.

"If plaintiff's counsel are not permitted to aid their clients, to whom they owe fiduciary duties, in submitting objections or exclusion requests, it may be unduly burdensome for individual collection-action member to navigate the procedures on their own," the opinion states. "It is also disturbing that plaintiff's counsel could be prohibited from vigorously advocating in the best interests of their clients, the individual collective-action members."

Alsup added pointedly: "No justification is provided for the fairness and reasonableness of this provision."

Most bothersome of all to Alsup was the simultaneously handling by class counsel of all three labor and employment claims against Aeropostale. There is Supreme Court precedent on the issue of counsel representing multiple classes against the same defendant, he said.

"This is because defendants have an incentive to settle all claims at once, if it settles at all, thereby creating opportunities for counsel to manipulate the allocation of settlement dollars to the detriment of absent class members," the opinion states. "Here, the same plaintiff's counsel settled all three actions within months.

Responding to their conflict of interest, the attorneys merely contended that Aeropostale had no objection.

"This response is ridiculous, missing the point entirely, for in a collusive deal the defense would be the last to criticize the deal or to criticize counsel for plaintiff," Alsup wrote.

Alsup scrapped the whole deal on May 29. Though the case was slated for trial Monday, the judge picked Aug. 18 as a more practical date.

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