JON S. TIGAR, District Judge.
Before the Court is an unopposed Motion for Conditional Class Certification and Preliminary Approval of Settlement, filed by Plaintiff. ECF No. 152. For the reasons stated below, conditional class certification is granted, and preliminary approval of the settlement is denied.
Named Plaintiff Michael Deatrick represents a class of individuals who are current and former employes of Defendant Securitas Services USA, Inc. ("Securitas"), a national provider of security services. Deatrick worked for Securitas as a security guard for several years prior to being laid off. Plaintiffs allege that Securitas failed to pay Deatrick and other security guards the full overtime compensation they were owed, because Securitas failed to take into account in the overtime calculation the payments that security guards received in connection with Securitas' "Vacation Pay Plan" ("the Plan"). Third Am. Compl. ("TAC"), ECF No. 129, ¶¶ 8-16. Plaintiffs allege that Securitas improperly treated these payments as vacation payments under the FLSA, even though such payments were, in practice, retention or productivity bonuses.
The TAC asserts a claim under the Fair Labor Standards Act ("FLSA") for failure to pay overtime wages against Securitas on his own behalf and on behalf of a putative class of Securitas employees who were subject to the Plan. Additionally, it asserts the following claims: (1) a claim for failure to pay overtime wages in violation of California Labor Code sections 510 and 1198; (2) a claim for inaccurate wage statements in violation of California Labor Code sections 226 and 1174; (3) a claim for waiting time penalties under California Labor Code section 203 for failure to pay the wages owed upon termination; (4) a claim under California's Unfair Competition Law ("UCL"); (5) violation of overtime and wage premium laws in eight other states besides California; and (6) a claim under California's Private Attorneys General Act. TAC, ¶¶ 46-105.
The Plaintiffs' claims revolve around Securitas's policy for vacation pay.
One result of this, Plaintiffs assert, is that if an employee ends his employment before his anniversary date for any reason (including termination by the employer), he will not receive his vacation benefits for that year.
On May 9, 2014, Securitas filed a Motion for Summary Judgment or in the alternative, for Partial Summary Judgment, ECF No. 31, which was denied by the Court on June 23, 2014, ECF No. 38. In their motion, Securitas advanced three arguments:
Deatrick filed a motion for conditional class certification on July 24, 2014, ECF No. 45. On November 4, 2014, the Court certified the following FLSA class:
ECF No. 65 at 2. It also approved the proposed notices and consent forms and ordered them distributed to the putative class.
The parties now inform us that the total number of opt-in plaintiffs in the case is currently 24,281. Motion for Conditional Class Certification and Preliminary Approval of Settlement ("Motion"), ECF No. 152 at 4. Plaintiffs request preliminary approval of a class settlement reached by the parties, which will be discussed further below. In addition, they request conditional certification of an additional California opt-out class defined as:
Motion, ECF No. 152 at 14. Defendant submitted a statement of non-opposition. ECF No. 153.
Class certification under Rule 23 of the Federal Rules of Civil Procedure is a two-step process. First, a plaintiff must demonstrate that the four requirements of Rule 23(a) are met: numerosity, commonality, typicality, and adequacy. "Class certification is proper only if the trial court has concluded, after a `rigorous analysis,' that Rule 23(a) has been satisfied."
Second, a plaintiff must establish that the action meets one of the bases for certification in Rule 23(b). Here, because they rely on Rule 23(b)(3), Plaintiffs must establish that "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).
The party seeking class certification bears the burden of demonstrating by a preponderance of the evidence that all four requirements of Rule 23(a) and at least one of the three requirements under Rule 23(b) are met. See Wal-Mart, 131 S. Ct. at 2551.
In addition to the FLSA nationwide class that the Court previously certified, Plaintiffs request that the Court provisionally certify a second California class for the purpose of settlement. They define the class as follows:
Motion, ECF No. 152 at 14. Unlike the FLSA class, which was opt-in, the proposed class will be opt-out.
For the reasons set forth below, the Court grants the request to provisionally certify the California class for settlement purposes.
Rule 23(a)(1) requires that the class be "so numerous that joinder of all members is impracticable." Here, Plaintiffs state that that the proposed class would include at least 11,000 people, as well as those who did not opt-in to the FLSA class and reside in California. Joinder of thousands of individuals would be impracticable.
In addition, while not enumerated in Rule 23, "courts have recognized that `in order to maintain a class action, the class sought to be represented must be adequately defined and clearly ascertainable.'"
A Rule 23 class is certifiable only if "there are questions of law or fact common to the class." Fed. R. Civ. P. 23(a)(2). For the purposes of Rule 23(a)(2), "even a single common question" is sufficient.
As Plaintiffs explain, all members of the proposed class share the common question of whether the lump-sum vacation pay provided by Securitas "actually constitutes a non-discretionary bonus that should have been included in the `regular rate' of pay for calculation of overtime pay." Motion, ECF No. 152 at 16. This is the dominant legal question in the case and satisfies the commonality requirement.
In certifying a class, courts must find 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). "The purpose of the typicality requirement is to assure that the interest of the named representative aligns with the interests of the class."
Plaintiff Deatrick is a California resident and former California employee of Securitas. TAC, ¶ 4. Plaintiffs argue that his claims are "substantially identical to the claims of absent Class Members" and that "the claims rise and fall under the same factual circumstances and legal theories." Motion, ECF No. 152 at 16. Deatrick's and the proposed class's claims both rely on the same policies of Securitas. This satisfies the typicality requirement.
"The adequacy of representation requirement . . . 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?"
No party has suggested, and the Court has not found, any evidence in the record suggesting that Deatrick has any conflict of interest with the other class members. Deatrick shares common claims with the class, seeks the same relief as they do, and bases his claims the same underlying facts. Further, Plaintiffs' counsel have submitted several declarations highlighting their experience in their careers litigating wage and hour class action litigation.
To certify a Rule 23 damages class, the Court must find that "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). The predominance inquiry "tests whether proposed classes are sufficiently cohesive to warrant adjudication by representation."
Here, the dominant legal issue is how to interpret Securitas's vacation pay policy. The various questions that surround this issue predominate over any questions that could affect only individual class members. A class action is also a superior method for fairly and efficiently adjudicating those and other questions. The class consists of thousands of members who would be unlikely to bring individual claims for the small amounts of money they are each due. Even if this were not so, resolving their disputes in a single class action would be far more efficient than on an individual level. The Court concludes that the proposed class satisfies the requirements of Rule 23(b)(3).
Accordingly, the Court finds that provisional certification of the proposed California opt-out class is appropriate for the purposes of this settlement.
The Ninth Circuit maintains a "strong judicial policy" that favors the settlement of class actions.
The Court's task at the preliminary approval stage is to determine whether the settlement falls "within the range of possible approval." In re Tableware Antitrust Litig., 484 F.Supp.2d 1078, 1080 (N.D. Cal. 2007) (quotation omitted); see also MCL, 4th § 21.632 (explaining that courts "must make a preliminary determination on the fairness, reasonableness, and adequacy of the settlement terms and must direct the preparation of notice of the certification, proposed settlement, and date of the final fairness hearing."). Second, courts must hold a hearing pursuant to Rule 23(e)(2) to make a final determination of whether the settlement is "fair, reasonable, and adequate."
Preliminary approval of a settlement is appropriate if "the proposed settlement appears to be the product of serious, informed, non-collusive negotiations, has no obvious deficiencies, does not improperly grant preferential treatment to class representatives or segments of the class, and falls within the range of possible approval."
The proposed settlement provides for a total payment of $2,500,000 by Securitas. Motion, ECF No. 152 at 10. The parties divide this amount approximately as follows:
Members of the previously certified opt-in FLSA class will not need to submit any additional paperwork to receive a settlement payment. Members of the opt-out class will need to return a claim form in order to receive an award.
In exchange, class members will release "all disputes and claims arising from or related to facts alleged in the Action and which are based on facts, events and/or actions during the Class Period. These include all claims that have been or could have been made, including claims not known or suspected to exist, against Defendant under federal, state or local law or regulation . . . arising during the Class Period, arising out of allegations that Defendant mislabeled annual nondiscretionary bonuses paid to security guards as vacation pay and, as a result, failed to include the payment in the regular rate of pay for purposes of calculating overtime or other premium pay." In addition, they will also release "derivative claims arising from the alleged failure to properly calculate overtime or other premium pay, including (but not limited to) claims that Defendant failed to provide accurate pay statements, that Defendant failed to pay all wages when due and/or on termination, and claims made under the California Private Attorneys General Act (PAGA), whether in an individual or representative capacity." ECF No. 152, Ex. 6 ("Stipulation of Settlement") at ¶ 22.
The Court denies the motion for preliminary approval based on two deficiencies with the proposed notice procedure and claim form procedure, which are discussed further below. Setting these aside for the moment, the Court concludes that the amount proposed to be awarded to the class falls "within the range of possible approval." Plaintiffs submit a declaration stating that the "average value of actual underpaid overtime wages for the full possible statutory period" for each class member is $78, while the average pretax payment for class members under the settlement would be approximately $44. Hurley Decl., ECF No. 152, Ex. 3, ¶ 12. Meanwhile, their motion notes several risks associated with pursuing further litigation on the claims, such as that Securitas will be able to establish a defense of good faith, as well as Defendant's motion to enforce class action waivers and arbitration clauses against many of the class members. Motion, ECF No. 152 at 20.
The Court will evaluate the final requests for attorneys' fees and incentive awards at the final approval hearing. Currently, Plaintiffs request attorney's fees of $748,000, or approximately 29.9% of the total settlement award, which is within the range of possible approval. The parties have also proposed an incentive award of $12,000 for the named plaintiff Deatrick, which the Court notes is approximately 270 times the size of the stated average award for other class members. The Court is unlikely to approve an incentive award that is so disproportionate to other class members' recovery in the absence of extraordinary circumstances.
As noted above, the parties propose providing notice of settlement through first class mail to addresses provided by Securitas. The parties also state that "reasonable steps" will be taken if notices are returned as undeliverable.
A statement that "reasonable" steps will be taken to ensure delivery lacks enough specificity for the Court to determine whether the notice process is sufficient. Instead, the parties should agree upon and describe the specific efforts that will be undertaken for notices returned as undeliverable. For example, another court in this circuit has approved a settlement plan that states the settlement administrator will "use[] the best available address by using the National Change of Address database or the equivalent to obtain forwarding addresses prior to mailing and using appropriate skip tracing to maximize the probability that the Notice and Claim Forms will be received by all Class members via U.S. Mail."
Plaintiffs explain that members of the opt-in FLSA class will not need to submit any additional paperwork to receive their share of the settlement payment. However, they state that members of the opt-out California class would need to submit a claim form. Motion, ECF No. 152 at 12. Members would have 30 days to submit their claim.
This procedure is not "fair, reasonable, or adequate." Plaintiffs do not explain why they require a claim form for the opt-out class when they do not have any such requirement for the opt-in class. Presumably, it would be easier (and less costly) to implement a single administrative procedure for both classes, and no reason is given for the different treatment.
More importantly, the parties neglect to consider the effect of requiring a claim form for an opt-out class. The proposed class notice states that those class members who "do nothing" will remain bound by the settlement agreement but will receive no compensation in exchange for waiving their rights. ECF No. 152, Ex. 7 ("Notice") at 2. Yet experience teaches that this is precisely what the majority of the class will do 2012 nothing.
Nor it is clear why Plaintiffs believe a claims form is even necessary. As the parties have noted, Securitas is the current and former employer of all members of the class, and it has their mailing addresses. The parties have also set out the method by which class members' awards will be determined and presumably already have the information they need to calculate each member's share. Perhaps this is why the proposed claim form is nothing more than a request for a signature, with no need to submit any other personal information. These facts do not suggest that claim forms are necessary to the administration of the settlement.
Accordingly, the Court concludes that the claim form requirement puts unnecessary impediments in the path of plaintiffs receiving their due compensation for their injuries under the proposed settlement. Future proposals should endeavor to avoid these impediments.
The motion for conditional certification of a class is granted. The motion for preliminary approval of settlement is denied.