Opinion
Case No.: 1:19-CV-00062-DAD-EPG
07-21-2020
JOHN CAVAZOS, on behalf of himself and all others similarly situated, Plaintiff, v. SALAS CONCRETE, INC., Defendants.
FINDINGS AND RECOMMENDATIONS REGARDING MOTION FOR PRELIMINARY APPROVAL OF CLASS ACTION SETTLEMENT ORDER SETTING FINAL APPROVAL HEARING (ECF No. 27)
Plaintiff John Cavazos's Motion for Preliminary Approval of Class Action Settlement (ECF No. 27) came before the Court for hearing on April 24, 2020. Attorney David Spivak appeared telephonically on behalf of Plaintiff; attorney James Miller appeared on behalf of Defendant, Salas Concrete, Inc. For the reasons set forth below, the Court recommends that Plaintiff's unopposed motion for preliminary approval be granted, subject to the findings and recommendations set forth herein, including a recommendation that the settling parties be required to revise the Notice of Class Action Settlement.
I. BACKGROUND
Defendant is a California corporation and a licensed concrete contractor that provides a wide range of concrete services, including supplying, forming, reinforcing, pouring, finishing, and resurfacing concrete. Plaintiff began working for Defendant in 2011 as an hourly construction worker in Clovis, California, and continued to work for Defendant until September 19, 2018, when Defendant terminated Plaintiff's employment.
On January 11, 2019, Plaintiff, on behalf of himself and other similarly situated employees, sent a written notice to the California Labor and Workforce Development Agency ("LDWA") and to Defendant of specific California Labor Code provisions Plaintiff alleges Defendant violated.
On January 14, 2019, Plaintiff, as an individual and on behalf of himself and all others similarly situated, filed the present action against Defendant. (ECF No. 1.) On March 27, 2019, Plaintiff filed a first amended complaint ("FAC"). (ECF No. 8.) The FAC alleges the following wage and hour claims against Defendant on behalf of Plaintiff and the proposed class: (1) Failure to pay minimum and overtime wages in violation of the Federal Labor Standards Act ("FLSA"); (2) Failure to pay all wages earned for all hours worked at the correct rates of pay; (3) Failure to provide rest breaks; (4) Failure to provide meal periods; (5) Failure to indemnify; (6) Wage statement penalties; (7) Waiting time penalties; (8) Unfair competition; and (9) Civil penalties under the Private Attorneys General Act ("PAGA"). (Id.)
On April 22, 2019, Defendant filed an answer to the FAC in which Defendant denied liability. (ECF No. 14.)
During the class certification discovery phase, Plaintiff sought from Defendant the names and contact information of putative class members and the parties agreed to a Belaire-West Notice to putative class members. The parties retained ILYM Group, Inc. ("ILYM") to provide for a Belaire-West Notice to putative class members. The Court approved the parties' stipulation to use this procedure for discovery of putative class member identities and contact information. (ECF No. 18.) Defendant provided ILYM with the names and contact information for 39 putative class members to whom ILYM mailed notice.
Belaire-West Landscape, Inc. v. Superior Court (Rodriguez), 149 Cal. App. 4th 554 (2007). "In wage and hour collective actions, fellow employees would not be expected to want to conceal their contact information from plaintiffs asserting employment law violations, the state policies in favor of effective enforcement of these laws weigh on the side of disclosure, and any residual privacy concerns can be protected by issuing so-called Belaire-West notices affording notice and an opportunity to opt out from disclosure." Williams v. Superior Court, 398 P.3d 69, 84 (Cal. 2017).
On November 6, 2019, the parties participated in a mediation session with the Honorable Steven M. Vartabedian, retired Associate Justice for the California Court of Appeals for the Fifth Circuit. At the conclusion of the settlement, the parties reached the material terms of a settlement (the "Settlement"). The Settlement was reached after substantial exchanges of data, information, and documents before and during the mediation, and after extensive negotiations. Prior to and during the mediation, and before agreeing to the terms of the Settlement, the parties engaged in informal discovery. Defendant produced time-keeping records and payroll and time information for putative class members. (ECF No. 27-2 at 3.)
In January 2020, the parties formally entered into the Settlement Agreement. (ECF No. 27-2 at 27-58.) The Settlement covers the "Class" or "Settlement Class," which is defined as "all current and former California hourly, non-exempt employees Salas Concrete, Inc. employed during the Class Period." (ECF No. 27-2 at 29.) The Class Period is in turn defined as "January 14, 2015 through November 6, 2019." (Id. at 30.) "Class Member" or "Settlement Class Member" is defined as "any person who is a member of the Settlement Class, or, if such person is incompetent or deceased, the person's legal guardian, executor, heir or successor-in-interest." (Id.) "Class Claimant" is defined as "any and all Class Members who do not submit a valid and timely Opt Out Request as provided herein." (Id.)
The Settlement Agreement is titled "Joint Stipulation of Class Action Settlement and Release." (ECF No. 27-2 at 27.)
"Claims" are defined under the Settlement as "the claims asserted in the First Amended Complaint, including any claim arising out of the facts alleged in the First Amended Complaint and all matters released in Article X of [the Settlement Agreement]." (Id. at 29 (footnote added).) "Released claims" are defined as any and all claims "arising out of the facts and circumstances alleged in the First Amended Complaint during the Claims Period. . . ." (Id. at 33.)
Article X of the Settlement Agreement provides that, upon the effective date,
each Class Member who has not submitted a timely Opt-Out Form, and the Named Plaintiff releases the Released Parties, and each of them, if and from any and all Released Claims through the end of the Claims Period.(ECF No. 27-2 at 50.)
It is the desire of the Parties and the Class Members to fully, finally, and forever settle, compromise, and discharge the Released Claims.
As such, the Class Members understand and agree that they are providing the Released Parties with a full and complete release with respect to the Released Claims through the end [of] the Claims Period. It is agreed that this Stipulation is intended to fully and finally resolve the Released Claims via final judgment as to each and every Class Member, except as to those who timely submit Opt-Out Requests.
Each Class Member, except those who timely Opt-Out, will be bound to the release of the Released Claims as a result of the Settlement and to the final judgment entered in the Action.
Defendant agrees to pay a Gross Settlement Amount in the amount of $175,000 and, in addition, agrees to pay Defendant's employer-side payroll taxes. The Gross Settlement Amount is proposed to be distributed as follows: (1) Class attorneys' fees not to exceed $58,333, which is 33 1/3% of the Gross Settlement Amount; (2) Class attorneys' expenses not to exceed $15,000; (3) incentive award to class representative not to exceed $10,000; (4) administrative expenses not to exceed $5,000; (5) a $4,000 PAGA award, with 75 percent to be paid to the LWDA pursuant to California Labor Code § 2699(i) and 25 percent to be paid to the Class Members; and (6) distribution of the Net Settlement Amount to all Class Claimants, less taxes and required withholding associated with each Class Claimant's share of the Individual Settlement Amount. (ECF No. 27-2 at 38-42.) The estimated Net Settlement Amount is $83,666. (Id. at 33.) The "Individual Settlement Amount," which is "the amount which is ultimately distributed to each Class Claimant, net of any Taxes and Required Withholdings," is estimated to be, on average, $2,091. (Id. at 32.) The amount of each Class Claimant's share will be calculated based on the number of pay periods worked by the Settlement Class Member while employed by Defendant during the Class Period. (Id. at 45-46.)
"Gross Settlement Amount" is defined as "the total amount, not to exceed One Hundred Seventy-Five Thousand Dollars ($175,000), that will be paid by Defendant to the Class Members in full settlement of the Released Claims asserted in this case, the Administrative Expenses, Taxes and Required Withholdings, Incentive Award and Class Attorney's Fees and Expenses. Defendant's share of any applicable payroll taxes shall be solely satisfied by Defendant separate and apart from the Gross Settlement Amount." (ECF No. 27-2 at 32.)
The Settlement requires Defendant to deposit with the Settlement Administrator, within ninety (90) days of the "effective date" of the Settlement Agreement, one seventh (1/7th) of the funds sufficient to pay the Gross Settlement Amount and one seventh (1/7th) of Defendant's related employer-side payroll taxes. (ECF No. 27-2 at 41.) Every 180 days thereafter, Defendant is to deposit an additional one seventh (1/7th) of the funds sufficient to pay the Gross Settlement Amount and one seventh (1/7th) of Defendant's employer-side payroll taxes, until Defendant has fully paid the Gross Settlement Amount and its employer-side payroll taxes. (Id. at 41-42.) Funds are to be distributed from the Gross Settlement Amount, as designated above, no later than fourteen (14) days after Defendant has deposited all funds required under the Settlement Agreement with the Settlement Administrator. (Id. at 46-47.)
"Effective Date" is defined as
The date when all of the following events have occurred: (a) this Stipulation has been executed by all Parties and by Class Counsel and Defense Counsel; (b) the Court has given preliminary approval to the Settlement; (c) notice has been given to the Class Members providing them with an opportunity to Opt-Out of the Settlement; (d) the Court has held a Final Approval and Fairness Hearing and entered a final order and judgment certifying the Class and approving this Stipulation; and (e) the later of the following events: the expiration of the period for filing any appeal, writ, or other appellate proceeding opposing the Settlement has elapsed without any appeal, writ, or other appellate proceeding opposing the Settlement with no right to pursue further remedies or relief; or any appeal, writ, or the issuance of such other final appellate order upholding the Court's final order with no right to pursue further remedies or relief.(ECF No. 27-2 at 31.)
The Settlement Agreement also contains a provision that allows Defendant to void the Settlement. (ECF No. 27-2 at 49.) Under this provision: "[i]f Class Members representing more than twenty percent (20%) of the Class's pay periods timely submit Opt-Out Requests, Defendant shall have the exclusive right to void this Settlement." (Id.)
On March 20, 2020, Plaintiff filed the instant unopposed motion for preliminary approval of the settlement. (ECF No. 27.) Plaintiff seeks an order (1) conditionally certifying the proposed Settlement Class; (2) preliminarily approving the Settlement; (3) approving, only for purposes of the Settlement, the appointment of Plaintiff as Class Representative; (4) approving, only for purposes of the Settlement, the appointment of the Spivak Law Firm and United Employees Law Group as Class Counsel; (5) approving, as to form and content, the Notice of Proposed Class Action Settlement and Final Hearing, attached to the Settlement Agreement; (6) appointing, only for purposes of the Settlement, Simpluris, Inc., as the Settlement Administrator; and (7) setting a fairness hearing for final approval of the Settlement.
II. LEGAL STANDARD
A court tasked with determining whether to approve a proposed class action settlement will almost always be required to engage in a "difficult balancing act." Allen v. Bedolla, 787 F.3d 1218, 1223 (9th Cir. 2015). "On the one hand, ... 'there is a strong judicial policy that favors settlements, particularly where complex class action litigation is concerned.'" Id. (citations omitted). "But on the other hand, 'settlement class actions present unique due process concerns for absent class members,' and the district court has a fiduciary duty to look after the interests of those absent class members." Id. (citations omitted). "The dangers of collusion between class counsel and the defendant, as well as the need for additional protections when the settlement is not negotiated by a court-designated class representative, weigh in favor of a more probing inquiry than may normally be required under Rule 23(e)." Hanlon, 150 F.3d at 1026.
"To guard against this potential for class action abuse, Rule 23(e) of the Federal Rules of Civil Procedure requires court approval of all class action settlements, which may be granted only after a fairness hearing and a determination that the settlement taken as a whole is fair, reasonable, and adequate." In re Bluetooth Headset Prod. Liab. Litig., 654 F.3d 935, 946 (9th Cir. 2011) (citing Fed. R. Civ. P. 23(e)(2); Staton v. Boeing Co., 327 F.3d 938, 972 n.22 (9th Cir. 2003) (court's role is to police the "inherent tensions among class representation, defendant's interests in minimizing the cost of the total settlement package, and class counsel's interest in fees").
The Rule 23 class settlement process generally proceeds in two phases. In the first phase, the court conditionally certifies the class, conducts a preliminary determination of the fairness of the settlement (subject to a more stringent final review), and approves the notice of class action settlement to be provided to the class. Ontiveros v. ZaCavazos, 303 F.R.D. 356, 363 (E.D. Cal. 2014). The purpose of this preliminary review is to ensure that an appropriate class exists, and that the agreement is non-collusive, without obvious deficiencies, and within the range of possible approval as to that class. See True v. Am. Honda Motor Co., 749 F. Supp. 2d 1052, 1062 (C.D. Cal. 2010); Newberg on Class Actions § 13:13 (5th ed. 2014).
In the second phase, the court holds a full fairness hearing where class members may present objections to class certification, or to the fairness of the settlement agreement. Ontiveros, 303 F.R.D. at 363 (citing Diaz v. Trust Territory of Pac. Islands, 876 F.2d 1401, 1408 (9th Cir. 1989)). Following the fairness hearing, the settlement may proceed only if, taking into account all of the information before the court, the court confirms that class certification is appropriate, and that the settlement is fair, reasonable, and adequate. See Valdez v. Neil Jones Food Co., 2015 WL 6697926, at *8 (E.D. Cal. Nov. 2, 2015); Miller v. CEVA Logistics USA, Inc., 2015 WL 4730176, at *3 (E.D. Cal. Aug. 10, 2015).
III. DISCUSSION
A. Conditional Class Certification
When the parties have entered into a settlement agreement before the district court certifies the class, the court "must pay 'undiluted, even heightened, attention' to class certification requirements. . . ." Staton, 327 F.3d at 952-53 (citations omitted). For class certification, the classes and sub-classes "must meet the four threshold requirements of Federal Rule of Civil Procedure 23(a): numerosity, commonality, typicality, and adequacy of representation." Leyva v. Medline Indus. Inc., 716 F.3d 510, 512 (9th Cir. 2013) (citing Fed. R. Civ. P. 23(a); Hanlon, 150 F.3d at 1019. The proposed class must also satisfy the requirements of Rule 23(b), which defines the three different types of classes allowed. Fed. R. Civ. P. 23(b); Leyva, 716 F.3d at 512. The plaintiff bears the burden of demonstrating that the requirements of Rule 23 have been satisfied as to the proposed class. See Wal-Mart Stores, Inc. v. Dukes, 564 U.S. 338, 350 (2011); Narouz v. Charter Commc'ns, LLC, 591 F.3d 1261, 1266 (9th Cir. 2010). "A court that is not satisfied that the requirements of Rule 23 have been met should refuse certification until [those requirements] have been met." Advisory Committee 2003 Note on Fed. R. Civ. P. 23(c)(1).
As discussed below, the requirements for class certification in Rule 23(a) and (b) are satisfied here. See Leyva, 716 F.3d at 512.
1. Rule 23(a) Requirements
a. Numerosity
A proposed class must be "so numerous that joinder of all members is impracticable." Fed. R. Civ. P. 23(a)(1). "The numerosity requirement requires examination of the specific facts of each case and imposes no absolute limitations." Gen. Tel. Co. of the Nw. v. Equal Employment Opportunity Comm'n, 446 U.S. 318, 330 (1980). Courts in the Ninth Circuit have found the requirement satisfied when the class is composed of as few as thirty-nine members. See Murillo v. Pac. Gas & Elec. Co., 266 F.R.D. 468, 474 (E.D. Cal. 2010) (citing Jordan v. L.A. County, 669 F.2d 1311, 1319 (9th Cir. 1982) (noting that class sizes of thirty-nine, sixty-four, and seventy-one are sufficient to satisfy the numerosity requirement), vacated on other grounds, 459 U.S. 810, 103 (1982)).
Here, the proposed class is defined as: "[A]ll current and former California hourly, non-exempt employees Salas Concrete, Inc., employed during the Class Period." (ECF No. 27-2 at 29.) The parties estimate that the class has 39 class members. Plaintiff contends that it would be impractical and economically inefficient to require each of these class members to separately maintain an individual action or be joined as a named plaintiff in the present action.
At the time the motion was filed, it was estimate that the class consisted of 40 members. (ECF No. 27-1 at 12). However, during the April 24, 2020, the settling parties indicated that there are 39 members.
The Court agrees and finds that Plaintiff has demonstrated that the numerosity requirements of Rule 23(a)(1) are satisfied. See Patrick v. Marshall, 460 F. Supp. 23, 29 (N.D. Cal. 1978) (certifying class with at least thirty-nine potential members); see also Hernandez v. Cnty. of Monterey, 305 F.R.D. 132, 152-53 (N.D. Cal. 2015) (A class or subclass with more than 40 members "raises a presumption of impracticability [of joinder] based on numbers alone."). ///
2. Commonality
Rule 23(a)(2) requires that there be "questions of law or fact common to the class." Fed. R. Civ. P. 23(a)(2). "The commonality preconditions of Rule 23(a)(2) are less rigorous than the companion requirements of Rule 23(b)(3)." Hanlon, 150 F.3d at 1019. "Indeed, Rule 23(a)(2) has been construed permissively." Id. "All questions of fact and law need not be common to satisfy the rule." Id. "The existence of shared legal issues with divergent factual predicates is sufficient, as is a common core of salient facts coupled with disparate legal remedies within the class." Id. To satisfy commonality, there must be a "common contention ... of such a nature that it is capable of classwide resolution - which means that determination of its truth or falsity will resolve an issue that is central to the validity of each one of the claims in one stroke." Wal-Mart Stores, Inc. v. Dukes, 564 U.S. 338, 350 (2011). A plaintiff can meet this burden by showing "[s]ignificant proof that an employer operated under a general policy" of harmful conduct if the conduct "manifested itself in hiring and promotion [and other employment] practices in the same general fashion . . . ." Id. at 353 (quoting Gen. Tel. Co. of Sw. v. Falcon, 457 U.S. 147, 159 n.15 (1982)).
Here, Plaintiff contends that there are many predominant common questions. All class members were subject to the same or similar operations and employment policies, practices, and procedures. The claims arise from Defendant's alleged uniform policy of failing to properly account for all time worked and failing to provide off-duty meal and rest periods, failing to pay minimum and overtime wages, failing to provide accurate written wage statements, failing to reimburse for expenses, and failing to timely pay all final wages. Finally, there are common questions of law and fact regarding Defendant's alleged unlawful practices, the ability of Class Members to take lawful meal and rest periods, and derivative liability for wage statement and final wages violations. These include whether Defendant failed to pay minimum and overtime wages to Class Members; failed to provide the Class Members with all meal and rest periods; failed to pay required premiums for workdays with unprovided meal and rest breaks; failed to pay Class Members for all hours worked at the correct rates; knowingly and intentionally failed to provide Class Members with accurate wage statements; and failed to indemnify and reimburse Class Members for expenses, including mobile phone and travel expenses. (ECF No. 27-1 at 19-20.) Plaintiff contends that the answers to these and other common questions could determine Defendant's liability to Class Members on the core of claims in this action, as well as derivative claims for statutory and civil penalties. (Id. at 19-20.)
The Court finds that Plaintiff has demonstrated that the commonality requirements of Rule 23(a)(2) are satisfied. See Wal-Mart, 564 U.S. at 350.
3. Typicality
Rule 23(a)(3) requires that "the claims or defenses of the representative parties are typical of the claims or defenses of the class." Fed. R. Civ. P. 23(a)(3); see Armstrong v. Davis, 275 F.3d 849, 868 (9th Cir. 2001). This typicality requirement is satisfied "when each class member's claim arises from the same course of events, and each class member makes similar legal arguments to prove the defendant's liability." Armstrong, 275 F.3d at 868; see also Kayes v. Pac. Lumber Co., 51 F.3d 1449, 1463 (9th Cir. 1995) (claims are typical where named plaintiffs have the same claims as other members of the class and are not subject to unique defenses). While representative claims must be "reasonably co-extensive with those of absent class members," they "need not be substantially identical." Hanlon, 150 F.3d at 1020; see also Hanon v. Dataproducts Corp., 976 F.2d 497, 508 (9th Cir. 1992).
Here, Plaintiff contends that his claims are typical for the purposes of certifying the Class. Plaintiff, like the proposed Class Members, was subject to the same relevant policies and procedures governing his compensation, hours of work, and meal and rest periods. He contends he was not compensated for overtime work, was not provided off-duty meal and rest periods, and was not reimbursed for use of his personal phone and travel expenses. Thus, he was subject to the same general course of conduct as other proposed Class Members and resolving the common questions as they apply to Plaintiff will determine Defendant's prima facie liability to all Class Members. Plaintiff's claims could also potentially be subject to the same primary affirmative defenses as those of the other proposed Class Members. (ECF No. 27-1 at 20-21.)
The Court finds that Plaintiff has demonstrated that the typicality requirement of Rule 23(a)(3) is satisfied because the claims of Cavazos, the class representative, is reasonably co- extensive with those of the absent proposed Class Members.
4. Adequacy of Representation
Before the Court can certify a class, the Court must be satisfied that "the representative parties will fairly and adequately protect the interests of the class." Fed. R. Civ. P. 23(a)(4). "[A] class representative must be part of the class and 'possess the same interest and suffer the same injury' as the class members." Amchem Prod., Inc. v. Windsor, 521 U.S. 591, 625-26 (1997) (citations omitted). "The proper resolution of this issue requires that two questions be addressed: (a) do the named plaintiffs and their counsel have any conflicts of interest with other class members and (b) will the named plaintiffs and their counsel prosecute the action vigorously on behalf of the class?" In re Mego Fin. Corp. Sec. Litig., 213 F.3d 454, 462 (9th Cir. 2000), as amended (June 19, 2000) (citations omitted).
Here, Plaintiff class representative, Cavazos, has submitted evidence that there is no conflict of interest between himself and the rest of the class. Cavazos represents that he and the absent proposed Class Members have strong and co-extensive interests in this litigation because they all worked for Defendant during the relevant time period, allegedly suffered the same alleged injuries from the same alleged course of conduct, and there is no evidence of any conflict of interest between him and the absent proposed Class Members. (ECF No. 27-1 at 12; ECF No. 27-2 at 5-6; ECF No. 27-4 at 3-4.) Plaintiff states that he has demonstrated his commitment to the proposed Class by, among other things, retaining experienced counsel, providing counsel with documents and extensively speaking with counsel to assist in identifying claims asserted in this case, assisting counsel in contacting the proposed Class Members and gathering information from them, meaningfully participating in the mediation and subsequent negotiations that led to the proposed settlement, and exposing himself to the risk of an award of attorneys' fees and costs against him if the complaint had been unsuccessful. (Ibid.)
The Court finds that Plaintiff, Cavazos, satisfies the adequacy of representation requirement.
Next, Plaintiff seeks appointment of his current counsel, Spivak Law and United Employees Law Group, as Class Counsel. The attorneys at these firms have prosecuted this action on behalf of Plaintiff and the proposed Class since the commencement of the litigation; and have significant experience in employment litigation generally, and wage and hour and employment-related class action litigation specifically. (ECF No. 27-1 at 21; ECF No. 27-2 at 5-8.; ECF No. 27-3 at 3.)
The Court finds that Plaintiff class representative's current counsel, Spivak Law and United Employees Law Group, satisfies the adequacy requirements for appointment as class counsel with respect to the proposed class.
B. Rule 23(b) Requirements
Plaintiff seeks certification under Rule 23(b)(3), which requires that "the questions of law or fact common to class members predominate over any questions affecting only individual members, and that a class action is superior to other available methods for fairly and efficiently adjudicating the controversy." Fed. R. Civ. P. 23(b)(3); see also Amchem, 521 U.S. at 615. The test of Rule 23(b)(3) is "far more demanding," than that of Rule 23(a). Wolin v. Jaguar Land Rover N. Am., LLC, 617 F.3d 1168, 1172 (9th Cir. 2010) (quoting Amchem, 521 U.S. at 623-24).
1. Predominance
First, questions of law or fact common to class members must predominate over any questions affecting only individual members. Fed. R. Civ. P. 23(b)(3). This "predominance inquiry tests whether proposed classes are sufficiently cohesive to warrant adjudication by representation." Hanlon, 150 F.3d at 1022 (quoting Amchem, 521 U.S. at 623). "This analysis presumes that the existence of common issues of fact or law have been established pursuant to Rule 23(a)(2); thus, the presence of commonality alone is not sufficient to fulfill Rule 23(b)(3)." Id. ("In contrast to Rule 23(a)(2), Rule 23(b)(3) focuses on the relationship between the common and individual issues."). "When common questions present a significant aspect of the case and they can be resolved for all members of the class in a single adjudication, there is clear justification for handling the dispute on a representative rather than on an individual basis." Id. (quoting 7A Charles Alan Wright, Arthur R. Miller & Mary Kay Kane, Federal Practice & Procedure § 1778 (2d ed.1986)).
Here, Plaintiff asserts that common questions to Class Members raised in this action predominate over any individualized questions. The Court agrees. As discussed above, the complaint alleges that Defendant failed to pay minimum and overtime wages to Class Members; failed to provide the Class Members with all meal and rest periods; failed to pay required premiums for workdays with unprovided meal and rest breaks; failed to pay Class Members for all hours worked at the correct rates; knowingly and intentionally failed to provide Class Members with accurate wage statements; and failed to indemnify and reimburse Class Members for expenses, including mobile phone and travel expenses. Although some of the claims may not apply to all Class Members, the common claims predominate over any individualized questions and the claims appear to be ones that can be resolved for all members of the class in a single adjudication.
The Court finds that the predominance requirement is met here for purposes of certifying the Class for settlement purposes only. Amchem Prods., Inc. v. Windsor, 521 U.S. 591, 618-20 (1997).
2. Superiority
Under Rule 23(b)(3), a class action must be "superior to other available methods for fairly and efficiently adjudicating the controversy." Fed. R. Civ. P. 23(b)(3). The matters pertinent to this finding include: "(A) the class members' interests in individually controlling the prosecution or defense of separate actions; (B) the extent and nature of any litigation concerning the controversy already begun by or against class members; (C) the desirability or undesirability of concentrating the litigation of the claims in the particular forum; and (D) the likely difficulties in managing a class action." Id.; see Amchem, 521 U.S. at 616.
Here, Plaintiff contends that a class action is superior to other available means for the fair and efficient adjudication of the claims because most of the proposed Class Members stand to recover damages in relatively small amounts, and a class action serves as the only method that permits the proposed Class Members to pool and pursue claims that would be uneconomical to litigate individually. The Court agrees and finds that "[t]his case involves multiple claims for relatively small individual sums. . . . If plaintiffs cannot proceed as a class, some - perhaps most - will be unable to proceed as individuals because of the disparity between their litigation costs and what they hope to recover." Local Joint Exec. Bd. of Culinary/Bartender Tr. Fund v. Las Vegas Sands, 244 F.3d 1152, 1163 (9th Cir. 2001); see Phillips Petroleum Co. v. Shutts, 472 U.S. 797, 809 (1985) (class actions can provide a mechanism for plaintiffs to pool claims that "would be uneconomical to litigate individually"); Wright, Miller & Kane, supra, at § 1779 ("[I]f a comparative evaluation of other procedures reveals no other realistic possibilities, this [superiority] portion of Rule 23(b)(3) has been satisfied.").
Further, it is unlikely that individual members of the proposed Class have any interest in individually controlling the prosecution or defense of individual actions, and any proposed Class Member who wants to pursue an individual claim can opt out of the proposed settlement.
Lack of knowledge of the legal system and limited economic resources would also likely deprive most Class Members of the opportunity to pursue their claims outside of a class action. Class action treatment will allow these similarly situated workers to litigate their claims in the manner that is most efficient and economical for the parties and the judicial system. There also does not appear to be any related pending litigation.
Finally, there are no apparent difficulties likely to be encountered in managing this class action.
The Court finds that the superiority requirement is met here.
C. Preliminary Fairness Determination
Plaintiff requests preliminary approval of the Settlement Agreement. (ECF No. 27-1 at 23-42; see 27-2 at 27-73 (Settlement Agreement).)
To approve a proposed settlement agreement that will bind absent class members, the Court must find that the settlement is "fair, reasonable, and adequate." Fed. R. Civ. P. 23(e)(2); see also Bluetooth, 654 F.3d at 946. When settlement occurs before class certification, the Court must also take extra care to ensure that "the settlement is not the product of collusion among the negotiating parties." Bluetooth, 654 F.3d at 946. Although the factors in a court's fairness assessment will vary from case to case, courts generally must weigh:
(1) the strength of the plaintiff's case; (2) the risk, expense, complexity, and likely duration of further litigation; (3) the risk of maintaining class action status throughout the trial; (4) the amount offered in settlement; (5) the extent of discovery completed and the stage of the proceedings; (6) the experience and views of counsel; (7) the presence of a governmental participant; and (8) the reaction of the class members of the proposed settlement."Id. (citations omitted). "This list is not exclusive and different factors may predominate in different factual contexts." Torrisi v. Tucson Elec. Power Co., 8 F.3d 1370, 1376 (9th Cir. 1993) (citations omitted).
Here, after balancing the relevant factors, the Court finds preliminary approval of the Settlement to be appropriate.
Plaintiff represents that the Settlement was reached after informed, arm's length negotiations among experienced counsel with the assistance of a highly regarded mediator and after sufficient discovery was exchanged to assess the relative strengths and weaknesses of the case and Defendant's estimated exposure. (ECF No. 27-1 at 24-25; ECF No. 27-2 at 11-12.) Plaintiff explains that this discovery included substantial exchanges of data, information and documents, including Defendant's financial records. (Ibid.) Plaintiff also explains that the financial condition of Defendant, discussed in more detail below, is the primary factor in the decision to accept the settlement on behalf of the proposed Class.
Based on the representations of counsel, the Court finds that the proposed settlement was the product of serious, informed, arm's-length negotiations by the parties. See Riker v. Gibbons, No. 3:08-CV-00115-LRH, 2010 WL 4366012, at *2 (D. Nev. Oct. 28, 2010) ("An initial presumption of fairness is usually involved if the settlement is recommended by class counsel after arm's-length bargaining.") (quoting 4 Alba Conte & Herbert B. Newberg, Newberg on Class Actions § 11:42 (4th ed.2002)); see also Nat'l Rural Telecommunications Coop. v. DIRECTV, Inc., 221 F.R.D. 523, 527-28 (C.D. Cal. 2004) ("A settlement following sufficient discovery and genuine arms-length negotiation is presumed fair." (citations omitted)).
As to the amount of the proposed settlement, in determining whether the amount offered is fair and reasonable, a court compares the proposed settlement to the best possible outcome for the Class. See Rodriguez v. W. Publ'g Corp., 563 F.3d 948, 964 (9th Cir. 2009). "It is well-settled law that a cash settlement amounting to only a fraction of the potential recovery does not per se render the settlement inadequate or unfair." In re Mego Fin. Corp. Sec. Litig., 213 F.3d 454, 459 (9th Cir. 2000), as amended (June 19, 2000) (citation omitted).
Here, Plaintiff estimates the total damages (maximum recoverable wages, unreimbursed expenses, and penalties) for the proposed class at $3,700,000, without taking into account any risks. (ECF No. 27-1 at 26-28; ECF No. 27-2 at 13-15.) In contrast, the amount of the proposed settlement is only $175,000, with an average estimated share for each class claimant of $2,091. (ECF No. 27-2 at 32.) Thus, the proposed settlement amount is only 4.7% of the estimated total damages.
The significant disparity between the estimated total damages and the proposed Settlement raises a red flag and is a significant concern to the Court. However, the Court finds, based on the representations of the parties, that the financial condition of Defendant justifies this disparity and the amount of the proposed Settlement.
According to Plaintiff, Defendant's tax returns for 2016 through 2018 show that Defendant operated at a loss in 2016 and 2018 and earned only a meager profit in 2017. (ECF No. 27-1 at 25; ECF No. 27-2 at 12.) Plaintiff also explains that Defendant's sole shareholder, who is 65 years old, stated convincingly that he would seek bankruptcy protection and shut down the business if the litigation continued. (Ibid.) According to Plaintiff, Defendant's assets include only vehicles (with little or negative equity), bobcats, utility work machines, tools, and office machines, all of low value, and neither Defendant nor its sole shareholder own any real property or have any significant cash reserves. The sole shareholder's only significant asset is his personal pick-up truck, which has minimal value. (Ibid.) Further, Plaintiff explains that even if he were to prevail on all claims at trial, and obtain a large class action judgment, recovery of the judgment would be unlikely due to Defendant's financial condition and the risk of Defendant's insolvency. (Ibid.) If Defendant goes out of business, the proposed Class Members are not likely to be able to recover any damages and will be left with nothing.
Although the financial condition of Defendant is the primary motivating factor in reaching the settlement agreement, Plaintiff cites to additional risks of continued litigation. (See ECF No. 27-1 at 28-33; ECF No. 27-2 at 15-19.) For example, Plaintiff believes that there is a substantial risk that a court could reduce civil penalties to an insignificant amount if unpersuaded that Defendant intentionally violated the law. Plaintiff points out that Defendant denies liability, denies that it engaged in any intentional wrongful conduct, and has witnesses (both supervisors and other employees) that will testify in support Defendant's position and in contradiction of Plaintiff's position. (Ibid.)
The poor financial condition of Defendant and the likelihood that if litigation proceeds, Defendant will seek bankruptcy protection and shut down operations entirely, creating a significant risk that the proposed Class would recover nothing, as well as the other risks cited by Plaintiff, convince the Court that the proposed settlement amount of $175,000 is fair and reasonable.
Of the $175,000 settlement amount, the parties have allocated $4,000 to settle the claim for penalties under the California Private Attorneys General Act ("PAGA"), Cal. Labor Code § 2698, et seq. Of the $4,000, seventy-five percent (75%) or $3,000, will be paid to the Labor Workforce and Development Agency ("LWDA") and twenty-five percent (25%) or $1,000 will be distributed to the proposed Class.
Plaintiff contends that $4,000 in settlement of the PAGA penalties claim is appropriate because the Class's claims are primarily for unpaid wages and unreimbursed expenses and not for penalties, and because civil penalties under the PAGA are difficult to predict in view of the PAGA's reduction provisions, which allow a court to award a lesser amount than the maximum civil penalty if, to do otherwise, would result in an unjust, arbitrary and oppressive, or confiscatory award. See Cal. Labor Code § 2699(e)(2).
Plaintiff also states that spreadsheets used in calculating total estimated damages, including penalties, are attached to Plaintiff's counsel's declaration, as Exhibit 6. (See ECF No. 27-2 at 13.) Although there is a single page attached to the declaration stating it is "Exhibit 6," there are no spreadsheets attached. The Court assumes that the supporting spreadsheets were inadvertently omitted. The Court cautions Plaintiff that such spreadsheets should be provided with its motion for final approval.
Plaintiff cites to Carrington v. Starbucks Corp., 30 Cal. App. 5th 504, 529 (2018), which affirmed a trial court's imposition of a $5 per violation penalty, rather than the maximum $50 per violation penalty, and declined to impose penalties for additional statutory violations. Plaintiff contends that, under the logic of Carrington, the proposed Class would not recover more than $67,540 in civil penalties ($5 x 13,508 workdays). (ECF No. 27-2 at 14-15.) Plaintiff also notes that a court could award no civil penalties if it determined that an award of premium wages was sufficient to punish Defendant's conduct. (ECF No. 27-1 at 32-33; ECF No. 27-2 at 15.) Plaintiff goes on to explain that it is extremely difficult to prove that wage and hour violations are knowing, intentional, or willful, which is needed to recover penalties. For these reasons, counsel dramatically discounted the value of civil penalties in negotiating the Settlement. (Ibid.)
The Court finds the proposed settlement of the PAGA penalties claim for $4,000 to be fair and reasonable There is no indication that the negotiated settlement amount for the PAGA penalties claim was the result of self-interest.
Moreover, in light of Defendant's position that any violations were not knowing, intentional, or willful, and the apparent existence of witnesses that would testify on Defendant's behalf that there was a good faith attempt by Defendant to comply with wage and hour laws, imposing the maximum PAGA penalty for each violation might be found to be unjust, arbitrary, and oppressive. See Carrington, 30 Cal. App. 5th at 528-29.
Finally, the proposed PAGA settlement amount, which is 2.3% of the proposed total settlement amount, is similar to settlements that have been approved by other courts. See, e.g., Ahmed v. Beverly Health & Rehab. Servs., Inc., 2018 WL 746393, at *10 (E.D. Cal. 2018) (approving PAGA settlement of $4,500, or 1% of the total settlement amount); Hicks v. Toys 'R' Us-Delaware, Inc., 2014 WL 4703915, at *1 (C.D. Cal. 2014) (approving PAGA settlement of $5,000 or 0.12% of the total settlement amount); Schiller v. David's Bridal, Inc., 2012 WL 2117001, at *2 (E.D. Cal. 2012) (approving PAGA settlement of $7,500 or 0.14% of the total settlement amount); Franco v. Ruiz Food Prods., Inc., 2012 WL 5941801 at *14 (E.D. Cal. 2012) (approving PAGA settlement of $10,000, or 0.4% of total settlement amount); Garcia v. Gordon Trucking, 2012 WL 5364575 at *3 (E.D. Cal. 2012) (approving PAGA settlement of $10,000 or 0.27 % of the total settlement amount); Munoz v. UPS Ground Freight, Inc., 2009 WL 1626376, at *1 (N.D. Cal. 2009) (approving PAGA settlement of $60,000 or 2% of the total settlement amount); Hopson v. Hanesbrands Inc., 2009 WL 928133, at *9 (N.D. Cal. 2009) (approving PAGA settlement of $1,500 or .037% of the total settlement amount); Nordstrom Com'n Cases, 186 Cal. App. 4th 576, 589 (2010) (approving PAGA settlement and release allocating $0 to PAGA claim).
D. Payment by Defendant and Distribution of Total Settlement Amount
1. Payment by Defendant
Under the proposed Settlement, within ninety (90) days of the Effective Date, and every 180 days thereafter until the Gross Settlement Amount of $175,000 is paid in full, Defendant is required to deposit with the Settlement Administrator one seventh (1/7) of the funds sufficient to pay the Gross Settlement Amount plus Defendant's employer-side payroll taxes on the funds constituting wages under the Settlement Agreement. (ECF No. 27-2 at 41.) The parties anticipate that Defendant will have fully paid the Gross Settlement Amount and its employer-side payroll taxes through seven equal payments within 39 months of the Effective Date. (Id. at 42.)
"Effective Date" is defined as follows:
"Effective Date" shall be the date when all of the following events have occurred: (a) this Stipulation has been executed by all Patties and by Class Counsel and Defense Counsel; (b) the Court has given preliminary approval to the Settlement; (c) notice has been given to the Class Members providing them with an opp01tunity to Opt-Out of the Settlement; (d) the Court has held a Final Approval and Fairness Hearing and entered a final order and judgment certifying the Class and approving this Stipulation; and (e) the later of the following events: the expiration of the period for filing any appeal, writ, or other appellate proceeding opposing the Settlement has elapsed without any appeal, writ or other appellate proceeding having been filed; or the dismissal of any appeal, writ, or other appellate proceeding opposing the Settlement with no right to pursue further remedies or relief; or any appeal, writ, or the issuance of such other final appellate order upholding the Court's final order with no right to pursue further remedies or relief.(ECF No. 27-2 at 31.) --------
During the April 24, 2020, hearing the parties explained that this payment plan is needed due to the financial condition of Defendant. As also discussed during the hearing, the Court is concerned with this protracted payment plan and the risk that Defendant will default. However, in light of the representations of the parties regarding the financial condition of Defendant and the resulting need for the payment over time of the Gross Settlement Amount, it appears that the payment plan is reasonable.
2. Distribution of Funds
Under the Settlement Agreement, no funds are to be distributed until after Defendant has deposited all funds due (the Gross Settlement Amount of $175,000 plus Defendant's related employer-side payroll taxes). (See ECF No. 27-2 at 46-47.) Within fourteen (14) days following the deposit by Defendant of all funds due, the Settlement Administrator is required to distribute the funds in the amounts as approved by the Court for attorneys' fees and expenses to be paid to Class Council; for any incentive award to be paid to named Plaintiff; and for the 75% of the PAGA award to be paid to LWDA. (Id.) Within twenty-eight (28) days following the deposit by Defendant of all funds due, the Settlement Administrator is to make every effort to pay taxes and required withholding associated with each Class Claimant's Individual Settlement Amount and mail the Individual Settlement Amount (less such taxes and required withholding) to each Class Claimant at their last known address. (Id. at 47.)
Again, the protracted process of receiving payment from Defendant and the risks of default, as well as the delay in the receipt by Class Claimants of payment, raises concern. During the April 24, 2020, hearing, the Court and the parties discussed the possibility of having funds distributed upon the receipt of each one-seventh (1/7) payment by Defendant. However, the parties informed the Court that this would increase significantly the costs of administering the settlement and thus significantly reduce the amount available for distribution to Class Claimants. In light of this representation, the Court finds the delay in distribution until after Defendant has deposited all funds due to be reasonable. E. Fees, Costs, and Representative Incentive Award
1. Attorneys' Fees
Courts "have an independent obligation to ensure that the award [of attorneys' fees], like the settlement itself, is reasonable, even if the parties have already agreed to an amount." In re Bluetooth Headset Prod. Liab. Litig., 654 F.3d 935, 941 (9th Cir. 2011); see also Consumer Privacy Cases, 175 Cal. App. 4th 545, 555 (2009) ("The court has a duty, independent of any objection, to assure that the amount and mode of payment of attorneys' fees are fair and proper, and may not simply act as a rubber stamp for the parties' agreement.").
Where, as here, fees are to be paid from a common fund, the relationship between the class members and class counsel "turns adversarial." In re Washington Pub. Power Supply Sys. Sec. Litig., 19 F.3d 1291, 1302 (9th Cir. 1994). As a result, the district court must assume a fiduciary role for the class members in evaluating a request for an award of attorney fees from the common fund. Id.; Rodriguez v. W. Publ'g Corp., 563 F.3d 948, 968 (9th Cir. 2009).
In evaluating the award of attorneys' fees, "courts have discretion to employ either the lodestar method or the percentage-of-recovery method." Bluetooth, 654 F.3d at 942 (citations omitted); see also Lealao v. Beneficial Cal., Inc., 82 Cal. App. 4th 19, 27, 53 (2000) (noting the same for state law claims in cases involving a common fund). Under either approach, "[r]easonableness is the goal, and mechanical or formulaic application of either method, where it yields an unreasonable result, can be an abuse of discretion." Fischel v. Equitable Life Assurance Soc'y of U.S., 307 F.3d 997, 1007 (9th Cir. 2002); see also Consumer Privacy Cases, 175 Cal. App. 4th at 557-58 (same).
Under the percentage of the fund method, the court may award class counsel a given percentage of the common fund recovered for the class; in the Ninth Circuit, the benchmark for such an award is twenty-five percent (25%). Fischel, 307 F.3d at 1007, 1047-48; see also Bluetooth, 654 F.3d at 942. Special circumstances that could justify varying the benchmark award include when counsel achieves exceptional results for the class, undertakes extremely risky litigation, generates benefits for the class beyond simply the cash settlement fund, or handles the case on a contingency basis. See In re Online DVD-Rental Antitrust Litig., 779 F.3d 934, 954-55 (9th Cir. 2015). An explanation, however, is necessary when the court departs from the twenty-five percent benchmark. Powers v. Eichen, 229 F.3d 1249, 1256-57 (9th Cir. 2000). Either way, "[s]election of the benchmark or any other rate must be supported by findings that take into account all of the circumstances of the case." Vizcaino v. Microsoft Corp., 290 F.3d 1043, 1048 (9th Cir. 2002).
With the lodestar method, the court multiples the number of hours the prevailing party reasonably spent litigating the case by a reasonable hourly rate for counsel. Bluetooth, 654 F.3d at 941. The product of this computation, the "lodestar" amount, yields a presumptively reasonable fee. See Gonzalez v. City of Maywood, 729 F.3d 1196, 1202 (9th Cir. 2013).
The Ninth Circuit has recommended that district courts apply one method but cross-check the appropriateness of the amount by employing the other as well. See Bluetooth, 654 F.3d at 944. This diligence is particularly important "when counting all hours expended" in a case "where the plaintiff has achieved only limited success" would yield an "excessive amount" of fees, or when awarding a percentage of a "megafund would yield windfall profits for class counsel in light of the hours spent on the case." Id. at 942 ("Just as the lodestar method can confirm that a percentage of recovery amount does not award counsel an exorbitant hourly rate, the percentage-of-recovery method can likewise be used to assure that counsel's fee does not dwarf class recovery.") (internal quotation marks and citations omitted).
Similarly, an upward adjustment could be justified if the recovery is "too small . . . in light of the hours devoted to the case or other relevant factors." Six (6) Mexican Workers v. Arizona Citrus Growers, 904 F.2d 1301, 1311 (9th Cir. 1990).
Here, under the terms of the Settlement Agreement, Plaintiff's counsel will make an application to the Court for an award of attorneys' fees of not more than $58,333 (33 1/3% of the gross settlement amount). (ECF No. 27-2 at 40.) This fee amount is above the benchmark for this circuit. See Bluetooth, 654 F.3d at 947 (setting a 25% benchmark); Staton, 327 F.3d at 952 (same); Six (6) Mexican Workers, 904 F.2d at 1311 (same).
Generally, the Court would follow the Ninth Circuit's recommendation that the lodestar method be used to cross-check the appropriateness of the percentage of fund award. However, Plaintiff has not provided supporting documentation demonstrating the number of hours counsel have expended on the case to date, nor proposed a reasonable hourly rate, making it impossible for the Court to perform a cross check using the lodestar amount. See City of Maywood, 729 F.3d at 1202 (lodestars are presumptively reasonable).
Despite this deficiency, the Court finds that conditional approval of the attorney's fees award anticipated by the proposed Settlement is appropriate. However, the Court cautions Plaintiff that when the application for attorneys' fees is submitted, Plaintiff's counsel will be required to explain the "special circumstances justifying a departure" from the benchmark. See Bluetooth, 654 F.3d at 942. The Court will cross check the requested amount with the lodestar amount and will determine whether the award of an above-benchmark percentage in fees is reasonable here. See Powers v. Eichen, 229 F.3d 1249, 1256-57 (9th Cir. 2000) (noting that an explanation is necessary when the district court departs from the twenty-five percent benchmark). Plaintiff will accordingly be required to submit appropriate documentation accounting for the number of hours expended by Plaintiff's counsel and a proposed reasonable hourly rate to allow the Court to calculate the lodestar amount.
2. Attorneys' Costs
Under the settlement, Plaintiff may seek an award of costs not to exceed $15,000. (ECF No. 27-2 at 40.) The Court finds that preliminary approval should be granted for this term of the settlement agreement. In connection with final approval, Plaintiff must submit a clearly organized expense log that specifically delineates the costs for which recovery is sought. See, e.g., City of Maywood, 729 F.3d at 1204 n.4 (holding that a district court can require a fee applicant to submit its supporting documentation in a specified format).
3. Class Representative Incentive Award
A district court may award incentive payments to named plaintiffs in class action cases. Rodriguez, 563 F.3d at 958-59. The purpose of incentive awards is to "compensate class representatives for work done on behalf of the class, to make up for financial or reputational risk undertaking in bringing the action, and, sometimes, to recognize their willingness to act as a private attorney general." Id. To justify an incentive award, a class representative must present "evidence demonstrating the quality of plaintiff's representative service," such as "substantial efforts taken as class representative to justify the discrepancy between [his] award and those of the unnamed plaintiffs." Alberto v. GMRI, Inc., 252 F.R.D. 652, 669 (E.D. Cal. 2008). Such incentive awards are particularly appropriate in wage-and-hour actions where a plaintiff undertakes a significant reputational risk in bringing suit against her former employer. Rodriguez, 563 F.3d at 958-59.
The Ninth Circuit has emphasized, however, that "district courts must be vigilant in scrutinizing all incentive awards." Radcliffe v. Experian Info. Sols., Inc., 715 F.3d 1157, 1165 (9th Cir. 2013) (internal quotation marks and citation omitted). In keeping with that admonition, district courts have declined to approve incentive awards that represent an unreasonably high proportion of the overall settlement amount or are disproportionate relative to the recovery of other class members. See Ontiveros, 303 F.R.D. at 365-66 (finding an incentive award of $20,000, comprising 1% of the common fund, to be excessive under the circumstances, and reducing the award to $15,000, where class representative spent 271 hours on the litigation and relinquished the opportunity to bring several of his own claims in order to act as class representative); see also Ko v. Natura Pet Prods., Inc., Civ. No. 09-2619 SBA, 2012 WL 3945541, at *15 (N.D. Cal. Sept. 10, 2012) (holding that an incentive award of $20,000, comprising one percent of the approximately $2 million common fund was "excessive under the circumstances" and reducing the award to $5,000); Wolph v. Acer Am. Corp., No. C 09-01314 JSW, 2013 WL 5718440, at *6 (N.D. Cal. Oct. 21, 2013) (reducing the incentive award to $2,000 where the class representatives did not demonstrate great risk to finances or reputation in bringing the class action). In reducing the award, courts have noted that overcompensation of class representatives could encourage collusion at the settlement stage of class actions by causing a divergence between the interests of the named plaintiff and the absent class members, destroying the adequacy of class representation. See Staton, 327 F.3d at 977-78; see also Radcliffe, 715 F.3d at 1165.
Here, the Settlement Agreement provides for a maximum class representative incentive award of $10,000. (ECF No. 727-2 at 39.) Plaintiff represents that this amount is reasonable given Plaintiff's efforts in this action and the risks he undertook on behalf of the absent Class Members. (ECF No. 27-1 at 40.) Plaintiff states that he devoted many hours advancing the interests of the Class, such as by retaining experienced counsel, providing counsel with information about his work history with Defendant and Defendant's policies and practices that relate to the wage and hour claims at issue, assisting in contacting Class Members to gather information, traveling to and participating in mediation, and being actively involved in the settlement process. (Id. at 41.) Plaintiff also now has a public record that he sued his former employer over unpaid wages and other claims, which may give rise to a stigma that jeopardizes his future employment opportunities. (Id.)
As discussed during the April 24, 2020, hearing, the Court is concerned with the amount of the proposed incentive award and the disparity between the award for Plaintiff, as the named class representative, and the estimated average award to be received by all Class Claimants.
The Court cautions that the proposed incentive award appears to be excessive under the circumstances of the case. The $10,000 proposed award constitutes 5.7% of the gross settlement amount and is almost 5 times higher than the estimated $2,091 average award to be received by all Class Claimants (including Plaintiff).
With this caution, the Court will approve the incentive award on a preliminary basis only. At the final approval hearing, the Court will review Plaintiff's evidence that the requested incentive award is warranted here, including evidence of the specific amount of time Plaintiff spent on the litigation, the particular risks and burdens carried by Plaintiff as a result of the litigation, and the particular benefit that Plaintiff provided to counsel and the Class as a whole throughout the litigation. See Goodwin, 2017 WL 3173006, at *12 (citing Bautista v. Harvest Mgmt. Sub LLC, No. CV 12-10004 FMO (CWx), 2013 WL 12125768, at *15 (C.D. Cal. Oct. 16, 2013)).
F. Appointment of Settlement Administrator
The parties have agreed upon and propose that the Court appoint Simpluris to serve as the Settlement Administrator. Plaintiff represents that prior to agreeing to Simpluris, the parties sought and reviewed bids from other reputable third-party administrators that had higher bids. (ECF No. 27-1 at 42; ECF No. 27-2 at 24, 157-60, 163-67, 169-71.) Simpluris has submitted a bid of $3,499. (ECF No. 27-2 at 157-58.) The Court finds it appropriate to approve the appointment of Simpluris as Class Administrator, and to grant preliminary approval of administrative expenses not to exceed $5,000.
G. Notice Procedures
For proposed settlements under Rule 23, "the court must direct notice in a reasonable manner to all class members who would be bound by the proposal." Fed. R. Civ. P. 23(e)(1); see also Hanlon, 150 F.3d at 1025 ("Adequate notice is critical to court approval of a class settlement under Rule 23(e)"). A class action settlement notice "is satisfactory if it generally describes the terms of the settlement in sufficient detail to alert those with adverse viewpoints to investigate and to come forward and be heard." Churchill Vill., LLC v. Gen. Elec., 561 F.3d 566, 575 (9th Cir. 2004) (internal quotations and citations omitted).
1. Proposed Notice
As noted during the April 24, 2020, hearing, the Court has several concerns with the proposed Notice. Those concerns are discussed below.
a. The Options Provisions
There are errors or, at minimum, unclear and confusing language, in the proposed Notice regarding the three options available to Class Members.
On the second page of the proposed notice, in a table titled, "Your Legal Rights and Options in this Settlement," reproduced below, the proposed notice states:
| YOUR LEGAL RIGHTS AND OPTIONS IN THIS SETTLEMENT | |
| ExcludeYourself | Get no payment. |
| Object | Write to the Court about why you don't like the settlement. |
| Do Nothing | The only way to get a payment. Give up rights to continue to pursuethe claim. |
The explanations in this table are wrong and misleading. The explanations state that the only way to participate in the Settlement and receive an award under the Settlement Agreement is to do nothing. This is wrong and misleading because a class member can file an objection and still participate in the Settlement.
In another section of the proposed notice, titled "What are your options?" located at the bottom of the fourth page and carrying over to the fifth page, the notice sets forth the same three options, although here the "do nothing" option is listed first and the "exclude yourself" option is listed last. (ECF No. 27-2 at 63-64.) The title for the "Object" option in this section is misleading when compared with the title for the "Do Nothing" option. The titles read:
OPTION 1 - DO NOTHING AND PARTICIPATE IN THE SETTLEMENT
. . . .
OPTION 2 - OBJECT TO THE SETTLEMENT
. . . . (ECF No. 27-2 at 63-64.) Including the phrase "Participate in the Settlement" only in the title of the "Do Nothing" option and not in the title of the "Object" option makes it appear that if a class member files an objection, that class member will not be able to participate in the settlement. The Court recognizes that the explanation provided below the "Object" heading clarifies that objecting to the settlement does not preclude participating in the settlement. However, it is possible that at least some Class Claimants would read the headings for the various options and assume that the only option that allows them to participate in the settlement is the "Do Nothing" option, and that they would not proceed to read the explanation under the "Object" option heading because they believe, based on the headings, that if they object they cannot participate.
The Court recommends that the parties be required to revise the options provisions of the proposed Notice to address the above concerns and ensure that all portions of those provisions accurately and clearly state that a Class Member may participate in the settlement if they either do nothing or they object.
b. Method of Objections Provision
The proposed Notice states:
If you wish to remain a Settlement Class Member, but you object to the proposed settlement (or any of its terms) and wish the Court to consider your objection at the Final Settlement Hearing, you may object to the proposed settlement in writing. You may also appear at the Final Settlement Hearing, either in person or through an attorney at your own expense.
If you wish to object to the Settlement, you must file a written objection with the Court and serve copies of the written objection to Class Counsel and Defense Counsel for receipt no later than 45 days from the date that Class Notice is mailed. The objection must include the case name and number and must set forth, in clear and concise terms, a statement of the reasons why the objector believes that the Court should find that the proposed Settlement is not in the best interest of the Class and the reasons why the Settlement should not be approved, including the legal and factual arguments supporting the objection. Copies of any objection must be simultaneously served on Class Counsel and Defense Counsel. Unless otherwise ordered by the Court, Class Members shall not be entitled to appear and or object at the Final Approval Hearing unless they have submitted a timely written objection pursuant to this Section. Class Members who have properly and timely submitted objections may appear at the Final Approval Hearing, either in person or through a lawyer retained at their own expense.(ECF No. 27-2 at 64.)
Any objection must be filed with the Court, either by mailing it to Clerk of the Court, United States District Court, Eastern District of California, 2500 Tulare Street, Fresno, California 93721, or by filing it in person at any location of the United States District Court of the Eastern District of California's civil filings. Any objection must also be served on Plaintiffs counsel and Salas Concrete's counsel at the addresses set forth below and on the Settlement Administrator. Objections must be filed and served no later than [45 days after mailing].
. . . .
IF YOU INTEND TO OBJECT TO THE SETTLEMENT, BUT WISH TO RECEIVE A SETTLEMENT PAYMENT, YOU NEED ONLY FOLLOW THE OBJECTION PROCEDURE DESCRIBED ABOVE. IF THE COURT APPROVES THE SETTLEMENT DESPITE ANY OBJECTIONS, AND YOU HAVE NOT SUBMITTED AN OPT-OUT REQUEST, YOU WILL RECEIVE A SETTLEMENT PAYMENT.
As the Court explained during the April 24, 2020, hearing, it is the Court's policy that anyone can raise objections at the fairness hearing for final approval of the settlement, but that the Court retains discretion to decline to consider an objection that has not been timely submitted in writing. The Court recommends that the parties be required to modify the objection provision of the proposed notice to reflect the Court's policy on this issue.
c. Final Settlement Hearing
The final settlement hearing section of the proposed Notice, located on the fourth page, provides:
The Court will conduct a final fairness hearing regarding the proposed settlement (the "Final Settlement Hearing") on , 2020, at , in Courtroom 5, 7th floor, United States District Court, Eastern District of California, 2500 Tulare Street, Fresno, California 93721. The Court will determine: (i) whether the lawsuit should be finally certified as a class or collective action for settlement
purposes; (ii) whether the settlement should be given the Court's final approval as fair, reasonable, adequate and in the best interests of the Class Members (iii) whether the Class Members should be bound by the terms of the settlement; (iv) the amount of the attorneys' fees and expenses to award to Plaintiffs counsel; and (v) the amount that should be awarded to Plaintiff as a service payment. At the Final Settlement Hearing, the Court will hear all properly filed objections, as well as arguments for and against the proposed settlement. You have a right to attend this hearing, but you are not required to do so. You also have the right to hire an attorney to represent you, or to enter an appearance and represent yourself.(ECF No. 27-2 at 63.)
The final fairness hearing will be set before the undersigned magistrate judge, rather than the district judge, and will therefore be held in Courtroom 10 (EPG) on the 6th Floor of the United States District Court in Fresno, California. Further, as discussed above, anyone may raise objections at the fairness hearing for final approval of the Settlement, but the Court retains discretion to decline to consider objections that have not been timely submitted in writing. The Court recommends that the parties be required to modify the final settlement hearing section of the proposed Notice to state the correct courtroom and to reflect the Court's policy on the ability to raise objections during the final settlement hearing.
d. Conclusion
The Court recommends that, within 14 days of the issuance of the order granting preliminary approval, the parties file a revised proposed notice that is consistent with this Order, including (1) that all portions of the options provisions accurately and clearly state that a class member may participate in the settlement if they either do nothing or they object; (2) that the objections provision accurately reflects the Court's policy that anyone can raise objections at the fairness hearing for final approval of the settlement, but that the Court retains discretion to decline to consider an objection that has not been timely submitted in writing; and (3) that the final settlement hearing section set forth the correct courtroom and reflect the Court's policy on the ability to raise objections during the final fairness hearing.
The Court recommends that the remainder of the Notice packet (ECF No. 27-2 at 60-73), as modified in compliance with the above recommendations, be approved.
2. Notice Procedure
Under the Settlement Agreement, within fourteen (14) days after entry of the order granting preliminary approval, Defendant is to provide to the Settlement Administrator and Class Counsel an updated "Database" (defined as a list of Class Members containing names, social security numbers, dates of employment, number of pay periods worked, last-known addresses and phone numbers (based upon documents in the possession of Defendant)). (ECF No. 27-2 at 43.) The Database is to be marked as "Confidential - Attorneys' and Settlement Administrator's Eyes Only." (Id.) This Database is to be kept confidential and in a secure location and used exclusively for the purpose of administration of the Settlement. (Id.)
Within fourteen (14) days after receipt of the Database, the Settlement Administrator is to determine the pay periods worked by each Class Member and send each Class Member a Notice packet consisting of the Class Notice, opt-out request form, and an easily understood statement alerting Class Members that, unless they elect to opt out of the Settlement, the Class Member is releasing and waiving all release claims against Defendant. This package is to be sent to each Class Member via first class U.S. mail and is to include a postage paid return envelope.
A Class Member need not act to participate in the Settlement. To opt out of the Settlement, the opt-out request form must be received by the Settlement Administrator within forty-five (45) days of the date the form was mailed by the Settlement Administrator to the Class Member. (ECF No. 27-2 at 43.) For any mail returned to the Settlement Administrator as undelivered, the Administrator will perform a skip trace search to seek an address for the relevant Class Member and will send a second Notice packet to any new or different address obtained. Such Class Members will have an additional fourteen (14) days in which to return the opt-out request form. If an envelope containing a Notice packet has not been returned within twenty-eight (28) days of mailing, it is presumed that it was received by the Class Member.
At least fourteen (14) days prior to the Final Approval and Fairness Hearing, the Settlement Administrator is to provide Class Counsel and Defense Counsel with a Declaration of Due Diligence and Proof of Mailing regarding the mailing of the Notice packet and the attempts to locate Class Members. Such declaration is to state the number of Class Members to whom Notice packets were sent and the number of Class Members to whom Notice packets were not delivered. Class Counsel is to file this declaration with the Court. (ECF No. 27-2 at 44.) Any Class Member who does not opt out of the Settlement is bound by the release of claims set forth in the Settlement Agreement, with the exception of the FLSA release.
The Court finds that the proposed Notice packet, including the Class Notice, and opt-out request form, with the exceptions and recommended modifications discussed above, and the notice procedures, sufficiently provide notice in a reasonable manner to all Class Members who would be bound by the Settlement Agreement and that the proposed mail delivery is also appropriate under the circumstances. The Court also finds the manner of distribution to be sufficient.
IV. CONCLUSION AND ORDER
Based on the foregoing, IT IS HEREBY RECOMMENDED:
1. The proposed class be conditionally certified under Rule 23(c)(1), for purposes of settlement only, as the proposed class satisfies the requirements of Rule 23(a) as well as the requirements for certification under one of the subsections of Rule 23(b), including that:
a. The class is so numerous that joinder of all members is impracticable;
b. There are questions of law and fact common to the class;
c. The claims or defenses of the representative party are typical of the claims or defenses of the class; and
d. The representative party will fairly and adequately protect the interests of the class.
2. The following persons be preliminarily certified as Class Members solely for the purpose of entering a settlement in this matter: All current and former California hourly, non-exempt employees of Salas Concrete, Inc. employed from January 14, 2015 through November 6, 2019.
3. The Settlement Agreement be granted preliminary approval as it falls within the range of possible approval as fair, adequate, and reasonable, and appears to be the product of arm's length and informed negotiations and to treat all Class Members fairly.
4. A final approval hearing on the question of whether the Settlement, attorneys' fees and costs to class counsel, and the class representative incentive award should be finally approved as fair, reasonable, and adequate be held as set forth below.
5. The form and content of the Notice of Proposed Class Action Settlement (ECF No. 27-2 at 60-73), be approved conditioned on the parties making the following modifications to the Notice:
a. Revise the options provisions so that all portions accurately and clearly state that a Class Member may participate in the settlement if they either do nothing or they object;
b. Revise the objections provision to accurately reflect the Court's policy that anyone can raise objections at the fairness hearing for final approval of the settlement, but that the Court retains discretion to decline to consider an objection that has not been timely submitted in writing; and
c. Revise the final settlement hearing section to set forth the correct courtroom for the hearing and to reflect the Court's policy on the ability to raise objections during the final settlement hearing.
6. The parties be directed to file a revised proposed Notice incorporating the above modifications within fourteen (14) days of the district court's order granting preliminary approval of the proposed Settlement.
7. The procedures for Class Members to be notified of, participate in, opt-out of, and object to the Settlement, as set forth in the Settlement Agreement (ECF No. 27-2 at 43-44), with the above modifications to the Notice, be approved.
8. The Court direct the mailing of the Notice packet by first class mail to the Class Members in accordance with the procedures set forth in the Settlement Agreement (ECF No. 27-2 at 44), with the above modifications to the Class Notice.
9. The Court approve the procedures for distributing the Notice packet to Class Members, with the above modifications to the Class Notice, as meeting the requirements of due process, providing the best notice practicable under the circumstances, and constituting due and sufficient notice to Class Members of the terms of the Settlement, their rights under the Settlement Agreement, their rights to object to or comment on the Settlement, their right to receive a share of the Settlement or elect not to participate in the Settlement and the processes for doing so, and the date and location of the final fairness hearing.
10. That Class Members will receive a share of the Settlement and be bound by the Settlement Agreement unless they submit a valid and timely Exclusion Form (opt-out form).
11. That any Class Member who elects not to participate in the Settlement has until forty-five (45) days after the mailing of the Notice packet to submit her or his Exclusion Form (opt-out form) under the procedures set forth in the Class Notice.
12. Simpluris be appointed to act as the Settlement Administrator, under the terms set forth in the Settlement Agreement.
13. John Cavazos be appointed as the Class Representative.
14. The Spivak Law Firm and United Employees Law Group be appointed as Class Counsel.
15. That the Notice packet, including Class Notice, with the above modifications, be distributed to Class Members in accordance with the procedures set forth in the Settlement Agreement. Proof of distribution of the Notice packet is to be filed by the parties in conjunction with the motion for an order granting final approval of the Settlement.
16. That a final approval hearing be held on January 22 , 2021, at 10:00 a.m ., in Courtroom 10 (EPG) before Magistrate Judge Erica P. Grosjean, to determine whether the Settlement should be granted final approval as fair, reasonable, and adequate as to the Class Members. The Court will hear all evidence and argument necessary to evaluate the Settlement, including any request for an incentive award, and for attorneys' fees and expenses. Class Members and their counsel may support or oppose the Settlement and any request for an incentive award and attorneys' fees and expenses, if they so desire and as set forth in the Class Notice.
17. That the motion for final approval of class action settlement be filed at least twenty-eight (28) days in advance of the final approval hearing, in accordance with Local Rule 230.
18. That the Court reserves the right to continue the date of the final approval hearing without further notice to Class Members. The Court retains jurisdiction to consider all further applications arising out of or in connection with the Settlement.
These Findings and Recommendations will be submitted to the United States District Judge assigned to the case, pursuant to the provisions of Title 28 U.S.C. § 636(b)(1). Within fourteen (14) days after being served with these Findings and Recommendations, the parties may file written objections with the Court. The document should be captioned "Objections to Magistrate Judge's Findings and Recommendations." The parties are advised that failure to file objections within the specified time may result in the waiver of the "right to challenge the magistrate's factual findings" on appeal. Wilkerson v. Wheeler, 772 F.3d 834, 839 (9th Cir. 2014) (citing Baxter v. Sullivan, 923 F.2d 1391, 1394 (9th Cir. 1991)). IT IS SO ORDERED.
Dated: July 21 , 2020
/s/_________
UNITED STATES MAGISTRATE JUDGE