Many of our posts relate to trials, and appeals, but today’s arises in the settlement context. The Ninth Circuit held that a district court doesn’t necessarily have to assign a monetary value to proposed injunctive relief when approving the terms of a class action settlement. See Laguna, et al. v. Coverall North America Inc., et al., No. 12-55479 (9th Cir. 2014).
Plaintiffs brought a class action suit against Coverall, a janitorial franchising company, in 2009 alleging that (1) Coverall misclassified its California franchisees as independent contractors, thereby avoiding the protections afforded by California’s labor laws to franchisees; and (2) Coverall breached its franchise agreements, and committed fraudulent and unfair practices, by removing
customer accounts from franchisees without cause so that it allegedly could resell those accounts to other franchisees. After about two years of significant litigation, the parties agreed on a settlement.
A class member objected on several grounds, and the fees were in dispute. But our attention is focused on one issue: the assessment of the fact that settlement included some non-dollar relief — new franchisees would have a 30-day right to rescind their franchise agreements, and the settlement agreement also outlined other changes to the franchise agreements and Coverall’s operating procedures. The trial court approved the settlement, and the objectors appealed.
The court of appeals noted that it reviews the district court’s approval of a proposed class action settlement agreement for abuse of discretion. Rodriguez v. W. Publ’g Corp., 563 F.3d 948, 963 (9th Cir. 2009); see also United States v. Hinkson, 585 F.3d 1247, 1250 (9th Cir. 2009) (en banc) (giving general abuse of discretion standard in contexts beyond class actions). Thus, the review of a class action settlement is “extremely limited,” In re Mego Fin. Corp. Sec. Litig., 213 F.3d 454, 458 (9th Cir.
2000), and approval will only be reversed upon “a strong showing that the district court’s decision was a clear abuse of discretion,” Staton v. Boeing Co., 327 F.3d 938, 960 (9th Cir. 2003).
The objector here claimed that the district court was “under a special obligation to make clear, fact-based findings regarding the value of the non-monetary terms of the settlement,” by which he contended that the district court should have assigned a monetary value to the non-monetary terms of the settlement in order to assess approval. But, said the 9th Circuit, it had never required a district court to assign a monetary value to purely injunctive relief.
To the contrary, the general rule is that courts cannot “judge with confidence the value of the terms of a settlement agreement, especially one in which, as here, the settlement provides for injunctive relief.” Staton, 327 F.3d at 959. Monetary valuation of injunctive relief is difficult and imprecise. Courts typically put a good deal of stock in the product of an arms-length, non-collusive, negotiated resolution. The district court had no obligation to make explicit monetary calculations of the injunctive remedies.
The district court’s analysis was adequate in concluding that the injunctive terms of the settlement were not illusory because they had “practical value.” All things considered, the settlement was “reasonable and within the range that we should approve.”