VIRGINIA A. PHILLIPS, District Judge.
On March 23, 2015, Plaintiff Diana Barbosa ("Barbosa") filed a "Motion for Final Approval of Class/Collective/Representative Action Settlement" ("Approval Mot.") (Doc. No. 32) and a "Motion for Award of Attorneys' Fees, Litigation Expenses and Class Representative Enhancement" ("Fee Mot.") (Doc. No. 33). Barbosa seeks final judicial approval of an agreement to settle employment claims against her former employer, Defendant MediCredit, Inc. ("MediCredit"). The matter came before the Court for a hearing on April 20, 2015. After consideration of the papers filed in support of the motions, the Court GRANTS the motions, and enters final approval of the settlement between Barbosa and MediCredit, and approves Class Counsel's request for attorneys' fees and other associated litigation costs.
Barbosa is a former employee of MediCredit, which is in the debt collecting business. (Order Granting Preliminary Approval ("Approval Order")(Doc. No. 31) at 2.) Barbosa alleges MediCredit discharged her on August 9, 2013 because she was pregnant. (First Amended Complaint ("FAC")(Doc. No. 28) ¶ 13; Approval Order at 2.)
In addition to her individual claims, Barbosa sets forth a collection of class claims asserting California wage and hour law violations. The FAC, on behalf of "all persons employed by Defendant in any non-exempt position in the State of California between December 9, 2009 and present," alleges the following class claims: (1) failure to pay overtime wages; (2) failure to provide itemized statement to employee; (3) failure to pay terminated or quitting employee; (4) unfair business practices; (5) failure to provide meal and rest periods; (6) recovery of civil penalties under the California Private Attorneys General Act ("PAGA"); and (7) violation of the federal Fair Labor Standards Act (collectively, "Class Claims").
Specifically, the Class Claims allege MediCredit pays its non-exempt workers commissions and performance bonuses, but those payments are not reflected in their base pay rates so the workers are automatically underpaid for any overtime worked. (Approval Order at 3; FAC ¶¶ 24-26.) Under the California Labor Code, a work week consists of forty hours, and all additional hours are considered overtime.
Barbosa filed a state court Complaint on December 9, 2013, and MediCredit removed the case to federal court on January 10, 2014. (Not. of Removal.) Following removal, the parties met with a private mediator and settled both Barbosa's individual wrongful termination claims and any potential class or representative claims.
Before meeting with the mediator, the parties conducted limited discovery, including Rule 26(a) initial disclosures, requests for production, and interrogatories. (
Barbosa filed a motion seeking provisional certification of the proposed class and preliminary approval of the Settlement Agreement, as well as provisional certification of the collective action under the Fair Labor Standards Act ("FLSA"), 29 U.S.C. § 201
The parties agreed to settle the case, pending approval of the Court, for a maximum sum of $200,000; this is the limit of MediCredit's liability under the Settlement Agreement and all claims, fees, and costs will be subtracted from the $200,000 amount ("Gross Settlement Amount"). (Settlement Agreement § IV ¶ B.) Barbosa's lawyers proposed to take a maximum of $60,000 from the Gross Settlement Amount for their fees, and up to $2,500 for their costs. (
Pursuant to the Court's Preliminary Approval Order, the Court conditionally certified a class for settlement purposes, comprising: "[a]ll persons employed by Defendant in any non-exempt position in the State of California between December 9, 2009 and the date the Court enters an order granting preliminary approval of the Settlement." (Approval Order at 10.) The parties estimate that there are approximately 480 past and current MediCredit employees who are members of this class. (
(Settlement Agreement § IV ¶ H.)
In order to receive payment from the settlement fund, the Settlement Agreement calls for "personal notice . . . by mail" because the parties state that is "the method best calculated to provide notice." (Approval Order at 5.) The Settlement Administrator will be responsible for mailing notice ("Notice") and issuing the checks to Class Members who submit claims. (Settlement Agreement § IV ¶ D.) The Settlement Administrator will mail the Notice to the last known address of a Class Member, as provided by MediCredit, and if the Notice is returned as undeliverable the administrator will "search for a more current address" and re-mail the Notice. (
Class Members who submit "valid and timely" Claim Forms ("timely" means 45 days after the Settlement Administrator mails the Notice) will receive their pro-rated share of the Net Settlement Amount, based on the proposed distribution formula. (Settlement Agreement § IV ¶ C.6.a.) That formula bases a Class Member's payout on "(1) the individual class member's total shifts worked during the class period; (2) divided by the total number of shifts of all class members during the class period; (3) multiplied by the net settlement amount." (
The parties' proposed Notice (Doc. No. 27-3), provides Class Members with a "brief description of the lawsuit," informs Class Members of "the proposed settlement terms," and advises Class Members of their "legal rights."
The Notice explains the substantive allegations of the FAC to Class Members. The Notice accurately describes the Gross Settlement Amount, and the deductions that will be made from it, then goes on to state unambiguously that the recipient of the Notice is entitled to recover money from the settlement, and how the amount of a claim will be calculated. (
The Notice further explains that to submit a claim, a Class Member must sign and return the Claim Form (enclosed with the Notice) to the Settlement Administrator by a date certain. (
The Claim Form is simple, and only requires the Class Member to fill in some personal information and mail the signed form back via U.S. Mail by the date indicated. (
Under Rule 23(e) of the Federal Rules of Civil Procedure, "claims, issues, or defenses of a certified class may be settled, voluntarily dismissed, or compromised only with the court's approval." Fed. R. Civ. P. 23(e). A court must engage in a two-step process to approve a proposed class action settlement. First, the court must determine whether the proposed settlement deserves preliminary approval.
Circuit law teaches that the court must balance the following factors to determine whether a class action settlement is fair, adequate, and reasonable:
As discussed below, after balancing the
As noted in the Court's Preliminary Approval Order, the gravamen of Barbosa's Class Claims related to overtime-rate violations pursuant to California Labor Code § 510(a), arise from MediCredit's alleged systemic failure to include employees' bonuses in employees' base pay rates. (Approval Order at 4.) The Court previously found that Plaintiffs' case under § 510(a) appeared strong because the class claims could easily be proven by reference to MediCredit's personnel and payroll records. (
This litigation is not complex. The theory of liability alleges a mechanical policy on the part of MediCredit that could be easily proved or disproved through minimal discovery of MediCredit's payroll records. Further, it is likely this case would not even reach trial; whether MediCredit systemically underpaid its workers could be resolved at summary judgment. Still, as Class Counsel points out, "[i]f this case had not settled, a motion for class certification, a possible appeal, post-certification merits discovery, and trial preparation would have exacted a significant toll on the Parties and the Court." (Approval Mot. at 7-8.) Accordingly, this factor weighs slightly in favor of approval.
The Court previously found the Class Members' risk of losing class action status in the future was low, because MediCredit's employees were all subject to the same alleged policy that resulted in underpayment of overtime wages. (Approval Order at 17.) Moreover, although MediCredit only conditionally stipulated to the facts necessary for class certification (
The amount of the Net Settlement Agreement, about $120,000, greatly exceeds the damages to the class as estimated by Class Counsel. (Approval Order at 4.) The Settlement Agreement offers class members compensation well in excess of what they would individually be entitled to if they brought their own claims — the Net Settlement Amount totals over $125,000 but Class Counsel estimate that class-wide damages for the § 510(a) violation would only amount to about $20,000. (
In the Preliminary Approval Order, the Court noted that only limited discovery had been undertaken in this case, and while the parties had completed initial disclosures, requests for production, and interrogatories, the record did not clarify exactly what has been requested or produced. (Approval Order at 18.) The Court further observed that it was not clear what the focus of the discovery was, beyond the § 510(a) violation and whether meal and rest breaks complied with the relevant statutes. (
The Court accepts Class Counsel's representation that all attorneys representing the class "primarily prosecute wage and hour class actions," and that each attorney "working on this matter [has] been appointed class counsel through certification and settlement of numerous wage and hour class actions." (Approval Mot. at 10.) Based on this extensive experience, Class Counsel believe that the settlement "is fair, adequate, and reasonable in protecting and vindicating the rights of Class Members." (
The Court previous noted that because one of the Class Claims was made pursuant to PAGA, the members of the Class were "aggrieved employees bringing . . . suit[]. . . as the State's agents. . . ." (
Class Counsel states that approximately 197 valid claims — 41.1% of the total expected class — were submitted by the optout deadline of February 23, 2015. (Approval Mot. at 10.) Of the total amount allocated to pay class claims, approximately 52% of those funds have been expended to pay claims. (
As the Court noted in the Preliminary Approval Order, this settlement was reached with the help of a neutral mediator, after an arm's-length mediation session. (Approval Order at 16.) Settlements reached with the help of a mediator are likely non-collusive.
When the
Rule 23 requires the court to 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." Fed. R. Civ. P. 23(c)(2)(B). In addition, Rule 23(e)(1) requires the court to "direct notice in a reasonable manner to all class members who would be bound by the proposal." The notice must explain in easily understood language the nature of the action, definition of the class, class claims, issues and defenses, ability to appear through individual counsel, procedure to request exclusion, and binding nature of a class judgment. Fed. R. Civ. P. 23(c)(2)(B). Plaintiff must provide notice to potential opt-in class members that is "timely, accurate, and informative."
The Court previously accepted the proposed Notice and Claim form, finding that "[t]he Notice explains in plain language what the case is about, what the recipient is entitled to, and what the Class Member must do next in order to make a claim," and "the Claim Form is similarly simple." (Approval Order at 21.) The Court now evaluates whether the parties executed class notice in accordance with the Court's Preliminary Approval Order.
According to Caroline Lowman, an employee of the Settlement Administrator, the Notice was disseminated in conformity with the Court's Preliminary Approval Order. (
Given the representations made by the Settlement Administrator that the Notice was disseminated in accordance with the Court's previous order and the number of Class Members who have responded to the Notice, the Court finds that the Notice was reasonable as to its content and the method of communication.
As the terms of the Settlement Agreement were fair, reasonable, and adequate, and because the procedures for dissemination of the Class Notice were reasonable, the Court finds that the Settlement Agreement should be approved.
The Preliminary Approval Order approved allocation of settlement funds for attorneys' fees, costs, incentive award payments, and settlement administrative expenses. As noted above, Class Counsel filed a separate motion (the Fee Mot.) requesting final approval of these expenditures. The Court addresses each in turn.
Notwithstanding an explicit agreement to shift attorney's fees in a certified class action, "courts have an independent obligation to ensure that the award, like the settlement itself, is reasonable, even if the parties have already agreed to an amount."
The Settlement Agreement sets aside 30% of the Gross Settlement Amount ($60,000 of the $200,000 total fund); the Court previously stated that "such an award is within the range of the possible, but will require more `justification' than is currently evident from the record before final approval. . . ." (Approval Order at 19.) The Court also stated that Class Counsel should submit "billing records in support of the proposed fee award, in the event the Court assesses the fee award under the lodestar method." (
Where the Court exercises its diversity jurisdiction, "state law governs both the right to recover attorney's fees and the computation of their amount."
Class Counsel has submitted detailed billing records along with the Fee Mot. Two attorneys, Aarin A. Zeif and Michael A. Gould, have expended 216.2 hours and 37.3 hours, respectively, prosecuting this action, for a total of 253.5 hours. (Gould Decl. ¶ 20; Declaration of Aarin A. Zeif ("Zeif Decl.") (Doc. No. 32-1) ¶ 8.) Ms. Zeif seeks an hourly rate of $450.00 per hour; in two previous actions, she has been approved for billing at that rate. (Zeif Decl. ¶ 7; Gould Decl. ¶ 21.) Mr. Gould seeks an hourly rate of $650.00 per hour; he has previously been approved for billing at $450.00 per hour along with Ms. Zeif, and has more than double Ms. Zeif's experience as an attorney. (Gould Decl. ¶ 21.)
Assuming Ms. Zeif and Mr. Gould billed their time at their requested rates, the lodestar total for their fees would be $121,535.00, calculated as (216.2 × $450.00) + (37.3 × $650.00). This is more than double the requested attorneys' fee award in this case.
The Court has reviewed the billing records submitted by Ms. Zeif and Mr. Gould (
The Court previously approved a reimbursement of up to $1,500.00 in litigation costs for Class Counsel. (Approval Order at 4; Fee Mot. at 4.) Costs are provided under the California Labor Code for reasonable fees and costs. (Fee Mot. at 7 (citing California Labor Code § 1194(a)).) Class Counsel only request reimbursement of $750.47, for which they have submitted an accounting. (Fee Mot. at 1, 15; Gould Decl. Ex. 2.) The Court finds these costs to be reasonable.
Class Counsel previously requested, and the Court preliminarily approved, an incentive award of $5,000 for Barbosa as a named Plaintiff. (Approval Order at 20.) "[N]amed plaintiffs, as opposed to designated class members who are not named plaintiffs, are eligible for reasonable incentive payments."
In determining whether a proposed incentive award is appropriate, courts may consider
Along with the Approval Mot., Barbosa submitted a declaration explaining the work she has done in this case from its inception to the parties' assent to the Settlement Agreement. (
The Court previously approved of the appointment of Class Action Claims Administration, Inc., to serve as the Settlement Administrator. (Approval Order at 21.) The Court also approved of a settlement administration fee of $5,500. (
As all the fees and costs as noted in the Approval Mot. and the Fee Mot. are fair, reasonable, and supported by the supplied evidence, the Court GRANTS the Fee Mot.
For the reasons stated above, the COURT APPROVES the settlement terms and GRANTS the Motion for Final Approval of Class Action Settlement, with the change agreed to by the parties that the Family-Sustaining Employment Foundation of the United Way shall be entitled to any