JANIS L. SAMMARTINO, District Judge.
Presently before the Court is Plaintiffs Joy Pearson, (in Case No. 13-cv-2009), and Linda Andrade and Liliana Avila's, (in Case No. 12-cv-2724), Unopposed Motion for Order Granting Preliminary Approval of Class Action Settlement. (ECF No. 128.) The Court vacated the hearing and took the motion under submission without oral argument pursuant to Civil Local Rule 7.1(d)(1). (ECF No. 130.) Plaintiffs also filed supplemental briefing at the Court's request. (ECF No. 131.) Because the settlement is fundamentally fair, reasonable, and adequate, the Court
On November 7, 2012, Plaintiffs Linda Andrade, and Liliana Avila filed a class action suit alleging violations of California's Labor and Business and Profession Codes on behalf of all non-exempt employees of Defendant P.F. Chang's China Bistro, Inc. ("MTN," ECF No. 128-1, at 12.)
Plaintiffs, across all three actions, assert seven claims for relief under various provisions of California law:
(See id. at 10.) Plaintiffs generally allege that Defendant has failed to set various wage-related policies. For example, Plaintiffs allege that Defendant has no "split-shift interval policy," which harmed Plaintiffs because they were not compensated during occasions they worked split shifts. (Third Am. Compl. ("TAC"), ECF No. 70, ¶ 26.) Defendant did not provide Plaintiffs a duty free meal period or compensate one hour of pay to compensate for the loss of the meal period. (Id. ¶¶ 35-36.) Next, Defendant allegedly did not provide Plaintiffs a rest period at the legally mandated rate of ten minutes for every four hours of work. (Id. ¶¶ 47-49.) Plaintiffs also allege that Defendant did not timely pay employees upon their discharge from employment with Defendant, as required by California law. (Id. ¶¶ 61-65.) Finally, Defendant did not provide Plaintiffs accurate itemized wage statement. (Id. ¶¶ 71-72.)
The Parties conducted voluminous discovery and motion practice, as well as arbitration, over the course of five years. (MTN 11.) They also engaged in two full-day mediations, once on August 18, 2016 and once on August 14, 2017. (Id. at 18.) The latter mediation was successful and resulted in a non-reversionary settlement of $6.5 million. (Id. at 19.)
Plaintiffs present to the Court an unopposed Motion for an Order: (1) conditionally certifying the proposed Settlement Class, defined below; (2) preliminarily approving the proposed settlement of $2.9 million; (3) approving the proposed Notice and directing distribution of the Notice and related documents; (4) approving CPT Group, Inc. as Claims Administrator; (5) appointing Plaintiffs' counsel as class counsel; (6) appointing Plaintiffs as class representatives; and (7) setting a schedule for final approval.
The Parties have submitted a comprehensive settlement document with approximately forty pages of substantive terms, (Stipulation of Settlement and Release ("Settlement Agreement"), Ex. A, ECF No. 128-2, at 24-64), and a nine-page proposed class notice, (Notice of Class Action Settlement, Ex. B., ECF No. 128-2, at 74-83). The settlement provides monetary relief but no programmatic relief.
Defendant proposes to pay a Maximum Settlement Fund of $6,500,000.00. (MTN 19.) From this amount will be deducted: (a) all Settlement payments to Class Members eligible for Settlement payments; (b) the Class Representative incentive payment approved by the Court; (c) Class Counsel's attorneys' fees and expenses approved by the Court; (d) administration fees and expenses; and (e) payment made to the State of California Labor Workforce and Development Agency ("LWDA"). (See Settlement Agreement ¶¶ III.L.2-6.) Defendant will automatically make Settlement payments to Class Members (unless they choose to opt out) based on the following formula:
(Id. ¶ III.L.2.a.) The check will escheat to the State of California Department of Industrial Relations Unpaid Wages Fund if the Class Member fails to cash his or her check within 180 days after it is mailed. (Id. ¶ III.L.2.e.)
Before granting preliminary approval of a class action settlement agreement, the Court must first determine whether the proposed class can be certified. Amchem Prods. v. Windsor, 521 U.S. 591, 620 (1997) (indicating that a district court must apply "undiluted, even heightened, attention [to class certification] in the settlement context" in order to protect absentees).
Class actions are governed by Federal Rule of Civil Procedure 23. To certify a class, each of the four requirements of Rule 23(a) must first be met. Zinser v. Accufix Research Inst., Inc., 253 F.3d 1180, 1186 (9th Cir. 2001). Rule 23(a) allows a class to be certified only if:
Fed. R. Civ. P. 23(a). Next, in addition to Rule 23(a)'s requirements, the proposed class must satisfy the requirements of one of the subdivisions of Rule 23(b). Zinser, 253 F.3d at 1186. Here, Plaintiffs seeks to certify the Settlement Class under subdivision Rule 23(b)(3), which permits certification if "questions of law or fact common to class members predominate over any questions affecting only individual class members," and "a class action is superior to other available methods for fairly and efficiently adjudicating the controversy." The Court addresses each of these requirements in turn.
Federal Rule of Civil Procedure 23(a)(1) requires that a class must be "so numerous that joinder of all members is impracticable." "[C]ourts generally find that the numerosity factor is satisfied if the class comprises 40 or more members and will find that it has not been satisfied when the class comprises 21 or fewer." Celano v. Marriott Int'l, Inc., 242 F.R.D. 544, 549 (N.D. Cal. 2007).
Here, the proposed Settlement Class consists of approximately 17,000 individuals, all of whom were (or are currently) employed by Defendant. (MTN 24.) Accordingly, joinder of all members would be impracticable for purposes of Rule 23(a)(1), and the numerosity requirement is satisfied.
Federal Rule of Civil Procedure 23(a)(2) requires that there be "questions of law or fact common to the class." Commonality requires that "the class members `have suffered the same injury.'" Wal-Mart Stores, Inc. v. Dukes, 564 U.S. 338, 349-50 (2011) (quoting Gen. Tel. Co. of Sw. v. Falcon, 457 U.S. 147, 157 (1982)). "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." Hanlon v. Chrysler Corp., 150 F.3d 1011, 1019 (9th Cir. 1998).
Here, the Parties have carefully defined the Settlement Class to encompass all employees adversely affected by the allegedly fraudulent policies and practices set forth above. (See MTN 24-26.) Critically, Defendant maintained uniform policies that applied to all non-exempt employees in California. (Id. at 24-25.) Additionally, Defendant allegedly maintained a uniform practice of failing to pay wage premiums for meal and rest period violations, split shift violations, and premium pay violations. (Id. at 25 (citing Safeway, Inc. v. Superior Court of L.A. Cnty., 238 Cal.App.4th 1138, 1140 (Ct. App. 2015); and Bradley v. Networkers Int'l, LLC, 211 Cal.App.4th 1129, 1150 (Ct. App. 2012)).) All common questions thus revolve around whether the alleged fraudulent policies and practices in fact were fraudulent and impacted the class members. Accordingly, it is appropriate for these issues to be adjudicated on a class-wide basis, and Rule 23(a)(2) is satisfied.
To satisfy Federal Rule of Civil Procedure 23(a)(3), Plaintiffs' claims must be typical of the claims of the Class. The typicality requirement is "permissive" and requires only that Plaintiffs' claims "are reasonably coextensive with those of absent class members." Hanlon, 150 F.3d at 1020. "The test of typicality `is whether other members have the same or similar injury, whether the action is based on conduct which is not unique to the named plaintiffs, and whether other class members have been injured by the same course of conduct.'" Hanon v. Dataproducts Corp., 976 F.2d 497, 508 (9th Cir. 1992) (quoting Schwartz v. Harp, 108 F.R.D. 279, 282 (C.D. Cal. 1985)). "[C]lass certification should not be granted if `there is a danger that absent class members will suffer if their representative is preoccupied with defenses unique to it.'" Id. (citation omitted).
Here, Plaintiffs are former P.F. Chang's employees, (TAC ¶ 7), whose claims allegedly arise out of the same underlying policies and practices as those pertaining to the proposed Settlement Class. (MTN 27.) Accordingly, Plaintiffs' claims are typical of the claims of the members of the proposed Settlement Class, thus satisfying Rule 23(a)(3).
Federal Rule of Civil Procedure 23(a)(4) requires that the named representatives fairly and adequately protect the interests of the class. "To satisfy constitutional due process concerns, absent class members must be afforded adequate representation before entry of judgment which binds them." Hanlon, 150 F.3d at 1020 (citing Hansberry v. Lee, 311 U.S. 32, 42-43 (1940)). To determine legal adequacy, the Court must resolve two questions: "(1) do the named plaintiffs and their counsel have any conflicts of interest with other class members, and (2) will the named plaintiffs and their counsel prosecute the action vigorously on behalf of the class?" Id.
Here, there is no reason to believe that the named representative and Class Counsel have any conflict of interest with the proposed Settlement Class members. The named representatives' claims are consistent with the other hourly employees they seek to represent. (MTN 27.) There is also no reason to believe that the named representative and Class Counsel have thus far failed to vigorously investigate and litigate this case. Plaintiffs have retained competent counsel, who have conducted extensive discovery, arbitration, motion practice, and mediation in this case. (Id. at 27-28.) Furthermore, Class Counsel have significant class action litigation experience, are knowledgeable about the applicable law, and will continue to commit their resources to further the interests of the Class. (Id. at 27.) Accordingly, the named representatives and Class Counsel adequately represent the proposed Settlement Class members, and Rule 23(a)(4)'s adequacy requirement is met.
Federal Rule of Civil Procedure 23(b)(3) permits certification if "questions of law or fact common to class members predominate over any questions affecting only individual class members," and "a class action is superior to other available methods for fairly and efficiently adjudicating the controversy."
"The Rule 23(b)(3) predominance inquiry tests whether the proposed classes are sufficiently cohesive to warrant adjudication by representation." Amchem Prods., 521 U.S. at 623. "Rule 23(b)(3) focuses on the relationship between the common and individual issues." Hanlon, 150 F.3d at 1022.
Here, the common issues include, but are not limited to, the following:
(MTN 28.) Further, for purposes of settlement, Class Members are not required to prove any evidentiary or factual issues that could arise in litigation. Accordingly, the predominance requirement of Rule 23(b)(3) is satisfied.
The final requirement for certification pursuant to Federal Rule of Civil Procedure 23(b)(3) is "that a class action [be] superior to other available methods for fairly and efficiently adjudicating the controversy." The superiority inquiry requires the Court to consider the four factors listed in Rule 23(b)(3):
See also Zinser, 253 F.3d at 1190. A court need not consider the fourth factor, however, when certification is solely for the purpose of settlement. See True v. Am. Honda Motor Co., 749 F.Supp.2d 1052, 1066 n.12 (C.D. Cal. 2010); see also Amchem, 521 U.S. at 620 ("Confronted with a request for settlement-only class certification, a district court need not inquire whether the case, if tried, would present intractable management problems, for the proposal is that there be no trial."). The superiority inquiry focuses "`on the efficiency and economy elements of the class action so that cases allowed under [Rule 23(b)(3)] are those that can be adjudicated most profitably on a representative basis.'" Zinser, 253 F.3d at 1190 (quoting 7A Charles Alan Wright & Arthur R. Miller, Federal Practice and Procedure § 1780, at 562 (2d ed. 1986)). A district court has "broad discretion" in determining whether class treatment is superior. Kamm v. Cal. City Dev. Co., 509 F.2d 205, 210 (9th Cir. 1975).
Here, Class Members' claims involve the same issues arising from the same factual bases. Class Members claims' are of relatively small value and Class Members likely are not aware of their potential claims. (MTN 30 (citing, e.g., Noll v. eBay, Inc., 309 F.R.D. 593, 604 (N.D. Cal. 2015)).) If Class Members' claims were considered on an individual basis, almost 17,000 cases would follow a similar trajectory, and each would come to a similar result. Furthermore, individual cases would consume a significant amount of the Court's and the Class Members' resources. It is also likely that Class Members would not pursue litigation on an individual basis due to the high costs of pursuing individual claims. The interests of the Settlement Class Members in individually controlling the litigation are minimal, especially given the same broad-based policy and practices would be at issue. Given all of the above, class treatment is the superior method of adjudicating this controversy, and the superiority requirement of Rule 23(b)(3) is met.
For the reasons stated above, the Court finds certification of the Settlement Class proper under Rule 23(b)(3). Accordingly, the Court
Having certified the Settlement Class, the Court must next make a preliminary determination as to whether the proposed settlement is "fair, reasonable, and adequate" pursuant to Federal Rule of Civil Procedure 23(e). Relevant factors to this determination include:
Hanlon, 150 F.3d at 1026 (citing Torrisi v. Tucson Elec. Power Co., 8 F.3d 1370, 1375 (9th Cir. 1993)).
In order to succeed on the merits, Plaintiffs would have to prove that Defendant's practices and policies were fraudulent and that Defendant failed to provide various wage statements and pay. (See generally TAC.) Defendant denies any wrongdoing. (See generally "Answer to TAC," ECF No. 72.) Plaintiffs, however, estimate Defendant's potential liability exposure on the underlying Labor Code claims to be approximately $13,033,200.00. (MTN 38 (citing Declaration of Tyler Belong ("Belong Decl."), ECF No. 128-2, ¶ 76).) Thus, the Settlement Amount represents approximately half the value of the Class Members' most probable claims. (Id.) Additionally, the Settlement is the result of arm's-length negotiations conducted over five years, including each Party's individual discovery and valuation of the case and two full-day mediation sessions before an experienced mediator. (Id. at 38-39.) Given the disagreement between the Parties and neutral third-party evaluation of the same, the Court thus finds that this factor weighs in favor of the $6.5 million settlement being fair, reasonable, and adequate.
Were the case to proceed to further litigation rather than settlement, the Parties would each bear substantial risk and a strong likelihood of protracted and contentious litigation. Plaintiffs point to several opinions recently issued by the California Court of Appeal concerning Private Attorney General Act ("PAGA") claims that could have a substantial impact on this case if it were to go forward. (Id. at 32 (citing, e.g., Esparza v. KS Indus., L.P., 13 Cal. App. 5th 1228 (Ct. App. 2017)).) Plaintiffs suggest that Esparza, and others like it, threaten the continued viability of the class claims. (Id. at 33.) Even though the Parties have agreed to settle this action, they fundamentally disagree regarding the validity of Plaintiffs' claims. Additionally, the Parties document a number of risks in litigating Plaintiffs' claims—including the fact that a class might not even be certified, Plaintiffs may lose at trial, and Defendant is likely to appeal any adverse orders or judgment—and thus argue that the present Settlement affords class members at least some compensation where there might be none. (Id. at 35.) Indeed, the fact that Defendant disputes all aspects of Plaintiffs' claims, including the propriety of class certification in the absence of the settlement agreement, suggests that these issues would be vigorously (and therefore costly) litigated were there to be further litigation. Given the foregoing, this factor weighs in favor the settlement being fair, reasonable, and adequate.
The Parties dispute whether the classes can be validly certified in the absence of the Settlement Agreement. Implicit in this disagreement is the likelihood of initial challenges to class certification and the potential for decertification motions even if class status is granted. Weighed against the fact that Defendant does not oppose a finding that the class elements are met for purposes of this settlement, this factor also weighs in favor of the settlement being fair, reasonable, and adequate.
Defendant has agreed to pay $6.5 million to settle this lawsuit. (Id. at 19.) The crux of Plaintiffs' claims is that Defendant failed to pay the Class Members the entirety of their earned wages as well as failed to adhere to other wage-related policies. As previously discussed, Plaintiffs calculate that the claims most likely to succeed at trial are worth approximately $13 million; thus, the Class Members' recovery will be about half the value of the claims. (Id. at 38.) Additionally, Plaintiffs point out that after the lawsuits were filed, Defendant apparently began paying its current employees premiums for missed meal and rest periods. (Id.) Thus, there has already been some tangible benefit resulting from these lawsuits. Accordingly, this factor weighs in favor of the settlement being fair, reasonable, and adequate.
Prior to the agreed-upon settlement, the Parties engaged in substantial discovery, including hundreds of written discovery requests, responses and supplemental responses, and depositions. (Id. at 12, 14.) The Parties engaged in substantial motion practice, including an appeal to the Ninth Circuit in the Pearson action. (Id. at 14.) And as discussed, the Parties twice engaged a neutral third-party mediator who fully examined and discussed with each Party the strengths and weaknesses of each Party's case. (Id. at 19.) Both Class Counsel and Defense Counsel gained significant knowledge of the relevant facts and law throughout the discovery process and through independent investigation and evaluation. Accordingly, it appears the Parties have entered into the Settlement Agreement with a strong working knowledge of the relevant facts, law, and strengths and weaknesses of their claims and defenses. Given all of the above, this factor weighs in favor of the proposed settlement being fair, reasonable, and adequate.
"The recommendations of plaintiffs' counsel should be given a presumption of reasonableness." Boyd v. Bechtel Corp., 485 F.Supp. 610, 622 (N.D. Cal. 1979). And here, Class Counsel believes the Settlement Agreement is fair, reasonable, adequate, and in the best interest of the Settlement Class. (Settlement Agreement ¶ III.Y.) Furthermore, in the present case the presumption of reasonableness is warranted based on Class Counsel's expertise in complex litigation, familiarity with the relevant facts and law, and significant experience negotiating other class and collective action settlements. Given the foregoing, and according the appropriate weight to the judgment of these experienced counsel, this factor weighs in favor the proposed settlement being fair, reasonable, and adequate.
In the Ninth Circuit, a district court has discretion to apply either a lodestar method or a percentage-of-the-fund method in calculating a class fee award in a common fund case. Fischel v. Equitable Life Assur. Soc'y of U.S., 307 F.3d 997, 1006 (9th Cir. 2002). When applying the percentage-of-the-fund method, an attorneys' fees award of "twenty-five percent is the `benchmark' that district courts should award." In re Pac. Enters. Sec. Litig., 47 F.3d 373, 379 (9th Cir. 1995) (citing Six (6) Mexican Workers v. Ariz. Citrus Growers, 904 F.2d 1301, 1311 (9th Cir. 1990)); see Fischel, 307 F.3d at 1006. However, a district court "may adjust the benchmark when special circumstances indicate a higher or lower percentage would be appropriate." In re Pac. Enters. Sec. Litig., 47 F.3d at 379 (citing Six (6) Mexican Workers, 904 F.2d at 1311). "Reasonableness is the goal, and mechanical or formulaic application of either method, where it yields an unreasonable result, can be an abuse of discretion." Fischel, 307 F.3d at 1007.
In the present case, the Settlement Agreement specifies that Defendant will not oppose Class Counsel's request to the Court for approval of attorneys' fees in the amount equal to one-third (1/3) of the Maximum Settlement Amount ($2,166,66.67 out of $6,500,000), and reasonable costs in an amount not to exceed $100,000. (Settlement Agreement ¶ III.L.4.) In support of this provision, Class Counsel argue that the provision is consistent with awards granted by other courts in the Ninth Circuit. (MTN 43-44 (citing, e.g., Vasquez v. Coast Valley Roofing, Inc., 266 F.R.D. 482, 491 (E.D. Cal. 2010) (stating that "[t]he typical range of acceptable attorneys' fees in the Ninth Circuit is 20% to 33 1/3% of the total settlement value, with 25% considered the benchmark")).)
The benchmark award in Ninth Circuit for common fund cases is 25%. Hanlon, 150 F.3d at 1029. Class Counsel indicates they intend to apply for attorney's fees not to exceed one-third the class fund. (MTN 44.) The Court may adjust the benchmark where there are special circumstances. In re Pac. Enters. Sec. Litig., 47 F.3d at 379. At this stage, the Court concludes that the provision is reasonable.
The Ninth Circuit recognizes that named plaintiffs in class action litigation are eligible for reasonable incentive payments. Staton v. Boeing Co., 327 F.3d 938, 977 (9th Cir. 2003). The district court must evaluate each incentive award individually, using "`relevant factors includ[ing] the actions the plaintiff has taken to protect the interests of the class, the degree to which the class has benefitted from those actions, . . . the amount of time and effort the plaintiff expended in pursuing the litigation . . . and reasonabl[e] fear[s of] workplace retaliation.'" Id. (citing Cook v. Niedert, 142 F.3d 1004, 1016 (7th Cir. 1998)).
In the present case, the Settlement Agreement provides $2,500 each to Plaintiffs Joy Pearson, Linda Andrade, and Liliana Avila and $1,000 each to Plaintiffs Hunter Kidner, Lizette Vargas, Samantha Kidner, Madelene Geledzhyan, and Anissa Ramirez to be paid from the Maximum Payment, in addition to the Settlement payment they may otherwise receive as class members. (Settlement Agreement ¶ III.L.3.) This amount is well within the typical incentive awards amount. See Bellinghausen v. Tractor Supply Co., 306 F.R.D. 245, 267 (N.D. Cal. 2015). The Class Notice states that class representatives will receive the "collective amount of $12,500.00 for their work and efforts in prosecuting this case, for undertaking the risks of payment of costs (in the event the outcome of this Lawsuit was not favorable), and a general release of all claims." (Notice of Settlement, ECF No. 128-2, at 77.) Given the foregoing, the Court concludes that the current Settlement Agreement Class Representative Payment provision should not bar preliminary approval of the Settlement Agreement.
For the reasons stated above, the Court
Pursuant to Federal Rule of Civil Procedure 23(c)(2)(B), "[f]or any class certified under Rule 23(b)(3) the court must direct to class members the best notice that is practicable under the circumstances, including individual notice to all members who can be identified through reasonable effort." Because the Court has determined that certification is appropriate under Rule 23(b)(3), the mandatory notice procedures required by Rule 23(c)(2)(B) must be followed.
Where there is a class settlement, Federal Rule of Procedure 23(e)(1) requires the court to "direct notice in a reasonable manner to all class members who would be bound by the proposal." "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.'" Rodriguez v. W. Publ'g Corp., 563 F.3d 948, 962 (9th Cir. 2009) (quoting Churchill Vill., LLC v. Gen. Elec., 361 F.3d 566, 575 (9th Cir. 2004)); see also Grunin v. Int'l House of Pancakes, 513 F.2d 114, 120 (8th Cir. 1975) ("[T]he mechanics of the notice process are left to the discretion of the court subject only to the broad `reasonableness' standards imposed by due process.").
The Parties have agreed to notify the Class Members in writing by mailing all class members a Notice of Pendency of Class Action ("Notice") at the last known address the Class Members provided to Defendant during their employment. (MTN 41.) Given that some Class Members may only read Spanish, the proposed Notice will also be translated into and distributed in Spanish. (Id. at 40-41.) The Parties have agreed to have the Settlement Administrator send the Class Notice Packets to all identified Class Members using the mailing address information provided by Defendant and that the Settlement Administrator will use the National Change of Address Database to update and correct identifiable address changes. (Settlement Agreement ¶ III.K.3.) If the packet is returned because of an incorrect address, the Settlement Administrator will re-mail the packet to the forwarding address affixed to the returned mail. (Id. ¶ III.K.4.)
The proposed Notice explains:
(Id.) While the Court generally finds the Notice sufficient, the Court expresses its concern as to the following provision. The Settlement Agreement requires anyone wishing to appear at the Final Approval Hearing to object according to the method specified in the Agreement. The method includes delivering a Notice of Intention to Appear no later than fifteen (15) calendar days prior to the hearing. (Settlement Agreement ¶ III.K.9.) The Notice of Intention to Appear also requires an objector to identify testimony, witnesses, and exhibits that will be offered at the Final Approval Hearing. (Id.) However, these requirements are absent from the Notice to the Class Members; there is no fifteen day requirement, there is no mention of testimony, witnesses, and exhibits, and no mention of a "Notice of Intention to Appear."
Having thoroughly reviewed the jointly drafted Notice, the Court finds that the method and content of the Notice comply with Rule 23, with the exception outlined above. Accordingly, the Court approves the Parties' proposed notification plan and will allow the Parties to file an amended Notice addressing the Court's concern.
For the reasons stated above, the Court
Other than the preceding discussion, the Court finds that the Notice Procedure submitted by the Parties constitutes the best notice practicable under the circumstances. As provided in the Settlement Agreement, the Settlement Administrator
Within twenty-one (21) days of the date on which the Court approves amended Notice, Defendant
At the Final Approval Hearing, the Parties shall also be prepared to update the Court on any new developments since the filing of the motion, including any untimely submitted opt-outs, objections, and claims, or any other issues as the Court deems appropriate.
The date and time of the Final Approval Hearing shall be included in the Notice to be mailed to all class members.
