KIMBERLY J. MUELLER, District Judge.
This matter is before the court on the motion of Jerry D. Vanwagoner ("plaintiff" or "class representative") for an order preliminarily approving a class settlement and conditionally certifying the settlement class. (ECF 22.) The court held a hearing on the matter on April 11, 2014, at which Michael Carver appeared for plaintiff and Gregory Iskander appeared for defendant. As explained below, the court GRANTS plaintiff's motion.
This class action lawsuit arises out of defendant's alleged "failure to properly pay wages, overtime and commissions, failure to reimburse workers for all work-related expenses, [and] failure to provide lawful meal and rest periods. . . ." (ECF 13 ¶ 1.) In addition to the class-wide claims, plaintiff also brings individual claims for retaliation and wrongful termination in violation of public policy. (Id.)
Plaintiff began working as a security technician, "installing and maintaining security systems . . . [and also handling] . . . fire alarm systems" for Siemens Building Technologies Division ("BT") in 2010. BT is a division of defendant Siemens Industry, Inc. (Vanwagoner Decl., ECF 23-1 ¶¶ 1-2.) Plaintiff left his employment involuntarily in February 2013. (ECF 23 at 1.)
Plaintiff filed a class action complaint in Yolo County Superior Court in 2013, alleging various labor and wage law violations under California law on behalf of himself and the class, and individual claims for retaliation and wrongful termination in violation of public policy. (See generally ECF 23 at 1-3.) Defendant removed the case to this court, arguing diversity of citizenship jurisdiction under 28 U.S.C. § 1332(a). (ECF 2.) Defendant denies plaintiff's allegations. (ECF 23 at 4.) After removal, the parties learned "of a potentially related case pending in the Northern District of California" entitled Albert Ching v. Siemens Industry, Inc., No. 11-4838, 2013 WL 6200190 (N.D. Cal. Nov. 27, 2013). (ECF 23 at 3.) There, because a settlement was reached "on behalf of 115 Fire Service Technicians," the potential class members were narrowed in this action to security technicians only. (Id. at 4.)
After determining the potential class size to be 51 employees, the parties agreed to engage in mediation and selected as a mediator Michael Dickstein, who has significant experience in wage and hour class actions. (Carver Decl. ¶ 6.) As a result of the mediation, the parties settled plaintiff's individual claims for $30,000.
(ECF 25 ¶ 1.8.)
Under the terms of the settlement agreement, the maximum settlement amount is to be distributed as follows:
The settlement "includes a minimum payout to be distributed to [c]lass [m]embers who submitted Claim Forms of 60 percent of the Net Settlement Amount." (ECF 25 ¶ 6.1.) If "the amounts claimed [do] not rise to the level of 60 percent of the Net Settlement Amount, then each claimant's claim amount shall be increased, pro rata, such that a total of 60 percent of the Net Settlement Amount shall be distributed." (Id.)
Plaintiff's counsel declares that the settlement resulted from the parties' arms-length negotiations and the amount "is in the best interest of the class." (Id.) Further, plaintiff's counsel declares: "I have sufficient class action, litigation and employment law experience to properly evaluate the merits of this settlement. I believe the settlement is fair and reasonable in light of the risks. . . ." (ECF 24 ¶ 18.)
Plaintiff now moves this court seeking an order (1) approving the class settlement agreement; (2) conditionally certifying the class and appointing plaintiff as the class representative with plaintiff's counsel as class counsel; (3) approving the form and method of service; (4) approving the procedure for class members to submit claims, opt-out or object; and (5) setting a hearing date on a final settlement approval. (ECF 22 at 2.) Plaintiff's motion is unopposed. (Id.)
"Courts have long recognized that settlement class actions present unique due process concerns for absent class members." In re Bluetooth Headset Prods. Liab. Litig. (Bluetooth), 654 F.3d 935, 946 (9th Cir. 2011) (internal quotation marks omitted). To protect absent class members' due process rights, Rule 23(e) of the Federal Rules of Civil Procedure permits a class action to be settled "only with the court's approval" "after a hearing and on a finding" that the agreement is "fair, reasonable, and adequate." Moreover, if "the settlement agreement is negotiated prior to formal class certification," then "there is an even greater potential for a breach of fiduciary duty owed the class." Radcliffe v. Experian Info. Solutions Inc., 715 F.3d 1157, 1168 (9th Cir. 2013) (internal alteration and quotation marks omitted) (quoting Bluetooth, 654 F.3d at 946). "Accordingly, such agreements must withstand an even higher level of scrutiny for evidence of collusion or other conflicts than is ordinarily required under Rule 23(e) before securing the court's approval as fair." Bluetooth, 654 F.3d at 946. "Judicial review must be exacting and thorough." MANUAL FOR COMPLEX LITIGATION (FOURTH) § 21.61 (2004).
"Review of a proposed class action settlement usually involves two hearings." Id. § 21.632. First, the parties submit the proposed terms of the settlement so that the court can make "a preliminary fairness evaluation," and if the parties move "for both class certification and settlement approval, the certification hearing and preliminary fairness evaluation can usually be combined." Id. Then, "[t]he judge 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 the date of the final fairness hearing." Id. After the initial certification and notice to the class, the court then conducts a second fairness hearing before finally approving any proposed settlement. Narouz v. Charter Commc'ns, Inc., 591 F.3d 1261, 1266-67 (9th Cir. 2010).
Regarding class certification, the parties' stipulation that the class should be certified is not sufficient; instead the court "must pay undiluted, even heightened attention to class certification requirements." Amchem Prods., Inc. v. Windsor, 521 U.S. 591, 620 (1997) (internal quotations marks omitted). But see 4 ALBA CONTE & HERBERT B. NEWBERG, NEWBERG ON CLASS ACTIONS § 11:28 (4th ed. 2002) ("Since Amchem, approval of settlement classes is generally routine and courts are fairly forgiving of problems that might hinder class certification were the case not to be settled." (collecting cases)). Regarding notice to the class, the court must ensure that the class members "receive `the best notice that is practicable under the circumstances.'" Wal-Mart Stores, Inc. v. Dukes, ___ U.S. ___, 131 S.Ct. 2541, 2558 (2011) (quoting FED. R. CIV. P. 23(c)(2)(B)).
A party seeking to certify a class must demonstrate that it has met the requirements of Rule 23(a) and at least one of the requirements of Rule 23(b). Amchem, 521 U.S. at 614; Ellis v. Costco Wholesale Corp., 657 F.3d 970, 979-80 (9th Cir. 2011). Although the parties in this case have stipulated that a class exists for purposes of settlement, the court must nevertheless undertake the Rule 23 inquiry independently, both at this stage and at the later fairness hearing. West v. Circle K Stores, No. 2:04-cv-0438 WBS GGH, 2006 WL 1652598, at *2 (E.D. Cal. June 12, 2006).
Under Rule 23(a), before certifying a class, this court must be satisfied that:
Collins v. Cargill Meat Solutions Corp., 274 F.R.D. 294, 300 (E.D. Cal. 2011) (quoting In re Intel Sec. Litig., 89 F.R.D. 104, 112 (N.D. Cal. 1981)); accord FED. R. CIV. P. 23(a).
The court must also determine whether the proposed class satisfies Rule 23(b)(3), on which plaintiffs rely in this case. To meet the requirements of this subdivision of the rule, 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 effectively adjudicating the controversy.'" Dukes, 131 S. Ct. at 2558 (quoting FED. R. CIV. P. 23(b)(3)). "The matters pertinent to these findings include: (A) the class members' interests in individually controlling the prosecution or defense of separate actions; [and] (B) the extent and nature of any litigation concerning the controversy already begun by or against class members. . . ." FED. R. CIV. P. 23(b)(3)(A)-(B).
Although there is no absolute numerical threshold for numerosity, courts have approved classes consisting of 39, 64, and 71 plaintiffs. Murillo v. Pac. Gas & Elec. Co., 266 F.R.D. 468, 474 (E.D. Cal. 2010) (citing Jordan v. L.A. Cnty., 669 F.2d 1311, 1319 (9th Cir. 1982), vacated on other grounds, 459 U.S. 810). Here, the parties agree the class includes 51 employees. (ECF 23 at 4.) Accordingly, the numerosity requirement has been met.
To satisfy the commonality requirement, plaintiffs must do more than show "that they have all suffered a violation of the same provision of law." Dukes, 131 S. Ct. at 2551. The claims must depend upon a common contention that "must be 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 those claims in one stroke." Id. It is not so much that the class raises common questions: what is necessary is "the capacity of a classwide proceeding to generate common answers. . . ." Id. "[T]he merits of the class members' substantive claims are often highly relevant when determining whether to certify a class." Ellis, 657 F.3d at 981.
Here, given the nature of the class claims and definition of the class, it appears the commonality requirement has been satisfied. Not only does the class raise common questions, but the class action may generate a class-wide answer to the central issues: whether defendant's calculation and payment of wages and overtime were correct and whether defendant engaged in a uniform practice of denying meal and rest periods and denying reimbursements. See Ching, 2013 WL 6200190, at *4 (finding commonality requirement satisfied where "issues facing the class ar[o]se from common questions involving [the] [d]efendant's calculation and payment of wages and overtime"); Dilts v. Penske Logistics, LLC, 267 F.R.D. 625, 633 (S.D. Cal. 2010) (finding the commonality requirement satisfied where the plaintiffs identified "common factual questions, such as whether [the] [d]efendants' policies deprived the . . . class members of meal periods, rest periods, overtime pay, and reimbursement . . . and common legal questions, such as [the] [d]efendants' obligations under [various sections of the] California Labor Code and California's Unfair Competition law").
"`[T]he commonality and typicality requirements of Rule 23(a) tend to merge'" because both act "`as guideposts for determining whether maintenance of a class action is economical and whether the named plaintiff's claim and the class claims are so interrelated that the interests of the class members will be fairly and adequately represented in their absence.'" Dukes, 131 S. Ct. at 2551 n.5 (quoting Gen. Tel. Co. of Sw. v. Falcon, 457 U.S. 147, 157-58 n.13 (1982)). A court resolves the typicality inquiry by considering "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." Ellis, 657 F.3d at 984 (citation and internal quotation marks omitted); Morales v. Stevco, Inc., No. 1:09-cv-00704 AWI-JLT, 2011 WL 5511767, at *6 (E.D. Cal. Nov. 10, 2011). In this case, it appears the class members suffered similar injuries when defendant allegedly failed "to properly pay wages, overtime and commissions, [failed] to reimburse workers for all work-related expenses, [and] [failed] to provide lawful meal and rest periods. . . ." (ECF 13 ¶ 1.) This satisfies the typicality inquiry. See Murillo, 266 F.R.D. at 475.
To determine whether the named plaintiffs will protect the interests of the class, the court must explore two factors: (1) whether the named plaintiff and counsel have any conflicts of interest with the class as a whole, and (2) whether the named plaintiff and counsel vigorously pursued the action on behalf of the class. Hanlon v. Chrysler Corp., 150 F.3d 1011, 1020 (9th Cir. 1998); see also Clersceri v. Beach City Investigation Servs., Inc., No. 10-cv-3873 JST (RZx), 2011 WL 320998, at *6 (C.D. Cal. Jan. 27, 2011) ("(1) the class representative must not have interests antagonistic to the unnamed class members, and (2) the representative must be able to prosecute the action `vigorously through qualified counsel.'" (citation omitted)).
Nothing in the papers presently before the court suggests the representative plaintiff has any conflicts of interest with the other class members. Though plaintiff has also settled his individual claims, his class-wide claims appear to be "completely aligned with [that] of the class." Collins, 274 F.R.D. at 301. Hence, there appears to be no conflict at this stage.
"Although there are no fixed standards by which `vigor' can be assayed, considerations include competency of counsel and, in the context of a settlement-only class, an assessment of the rationale for not pursuing further litigation." Hanlon, 150 F.3d at 1021. In addition, a named plaintiff will be deemed to be adequate "as long as the plaintiff has some basic knowledge of the lawsuit and is capable of making intelligent decisions based upon [the plaintiff's] lawyers' advice. . . ." Kaplan v. Pomerantz, 131 F.R.D. 118, 121-22 (N.D. Ill. 1990).
Plaintiff's counsel has described his experience in class-action cases and specifically, in class-action cases involving employment related matters. (See Carver Decl. ¶¶ 18, 21, ECF 24.) Specifically, plaintiff's counsel "has been practicing law since 1994, primarily in labor and employment law[,] [and has] represented over 1,000 individual employees and employers in employment law related matters." (Id. ¶ 18.) He also declares he has "litigated to conclusion and currently represent[s] parties in over two hundred cases filed in state and federal courts . . .[,] [and] . . . [has] been a plaintiffs' attorney in over one hundred cases filed as class actions which involved non-payment of overtime, wages, or meal and rest period violations." (Id.) Counsel also has explained that the parties agreed to settlement after "arm's-length negotiations through an experienced mediator and only after [they] conducted a reasonable investigation into the facts, considering the stage at which the parties mediated." (Id.)
At this preliminary stage of the settlement-approval process, the court finds the class representative and counsel to be adequate. See Falcon, 457 U.S. at 160 (observing that finding of adequacy "particularly during the period before any notice is sent to members of the class `is inherently tentative'").
"The Rule 23(b)(3) predominance inquiry tests whether proposed classes are sufficiently cohesive to warrant adjudication by representation." Amchem, 521 U.S. at 623. Although it is similar to Rule 23(a)'s commonality requirement, it is more demanding. Id. at 624. To determine whether common questions predominate, the court must consider "the relationship between the common and individual issues" by looking at the questions that preexist any settlement. Hanlon, 150 F.3d at 1022. In addition, the predominance inquiry focuses on the "notion that adjudication of common issues will help achieve judicial economy." In re Wells Fargo Home Mortg. Overtime Pay Litig., 571 F.3d 953, 958 (9th Cir. 2009) (citation and internal quotation marks omitted).
As noted above, with the major issues in this case stemming from defendant's alleged uniform failure to properly calculate wages and overtime; failure to account for meal periods and rest periods; failure to provide reimbursements; and little suggestion there will be individual issues apart from calculating individual damages, the class action will promote efficiency by allowing a number of claims to be litigated simultaneously. At this stage, the predominance requirement has been met.
In resolving the Rule 23(b)(3) superiority inquiry, the court should consider class members' interests in pursuing separate actions individually, any litigation already in progress involving the same controversy, the desirability of concentrating the litigation in one forum, and potential difficulties in managing the class action, although the last two considerations are not relevant in the settlement context. Schiller v. David's Bridal, Inc., No. 1:10-cv-0616 AWI-SKO, 2012 WL 2117001, at *10 (E.D. Cal. June 11, 2012) ("In the context of settlement, however, the third and fourth factors are rendered moot and are not relevant . . . because the point is that there will be no trial. . . ." (citing Amchem, 521 U.S. at 620)).
Here, if class members were to sue individually, each would bring essentially the same claims for relatively small sums and yet might have to expend substantial resources to cover litigation costs. Thus, a class action is superior to individual resolution of the claims.
In sum, because the court finds the requirements of Rule 23(a) and Rule 23(b)(3) are met, conditional certification of the class is appropriate. Accordingly, for settlement purposes only, the court certifies the following class:
(ECF 25 ¶ 1.8.)
"At this preliminary approval stage, the court need only `determine whether the proposed settlement is within the range of possible approval,'" Murillo, 266 F.R.D. at 479 (quoting Gautreaux v. Pierce, 690 F.2d 616, 621 n.3 (7th Cir. 1982)), such that there is a "reason to notify the class members of the proposed settlement and to proceed with a fairness hearing," Gautreaux, 690 F.2d at 621 n.3. The court considers:
Hanlon, 150 F.3d at 1026. This "initial evaluation can be made on the basis of information [contained in] briefs, motions, or informal presentations by parties," MANUAL FOR COMPLEX LITIGATION, supra, § 21.632, and "the Court need not review the settlement in detail at this time," Durham v. Cont'l Cent. Credit, Inc., No. 07-cv-1763 BTM-WMC, 2011 WL 90253, at *2 (S.D. Cal. Jan. 10, 2011) (citing NEWBERG, supra, § 11.25). Instead, "[g]reat weight is accorded the recommendation of counsel, who are most closely acquainted with the facts of the underlying litigation." Gribble v. Cool Transports, Inc., No. CV-06-04863, 2008 WL 5281665, at *9 (C.D. Cal. 2008) (citation and internal quotation marks omitted). However, the court must also consider whether the settlement is the result of collusion. Class Plaintiffs v. City of Seattle, 955 F.2d 1268, 1290, 1291 (9th Cir. 1992). Where "settlements are negotiated at arm's length," "a presumption of fairness applies. . . ." Gribble, 2008 WL 5281665, at *9.
The court has reviewed the proposed settlement's terms and moving papers and, considering them together with counsels' representations at the hearing, the court finds that the settlement terms are at this time "within the range of possible approval." Murillo, 266 F.R.D. at 479. The instant settlement agreement, quoted at length, includes the following material terms:
(ECF 25.)
As explained above, the parties participated in a full-day mediation overseen by experienced mediator Michael E. Dickstein, resulting in a memorandum of understanding signed by the parties on November 12, 2013. (Id. ¶ 2.7.) The parties represent they reached the settlement agreement "after having conducted significant investigation, analysis and discovery." (Id. ¶ 2.8.) Additionally, "prior to the mediation, and in connection with the [p]arties' formal and informal discovery and settlement negotiations, [d]efendant provided [p]laintiff with data concerning employees' time and payroll records, and other documentary evidence." (Id.) Accordingly, the parties believe their agreement is reasonable and is in the best interests of the class in light of the "sharply disputed factual and legal issues"; "the various risks"; and "the time and expense" that may be required. (Id. ¶ 2.9.)
At this stage of the case and based on the record before the court, there is no indication of collusion between or among the parties; no indication of preferential treatment between plaintiff and class members; and the agreement seems to be within the range of possible approval. See Ching, 2013 WL 6200190, at *6 (finding conditional class settlement appropriate under similar circumstances). As "the [c]ourt need not perform a full fairness analysis at this time because it will be done in connection with the [final] fairness hearing," Nieves v. Cmty. Choice Health Plan of Westchester, Inc., No. 08 CV 321 (VB)(PED), 2012 WL 857891, at *5 (S.D.N.Y. Feb. 24, 2012), this is sufficient for preliminary approval.
The court's preliminary approval is not without reservation. The court has several specific concerns that must be addressed before final approval. As a general matter, the court reminds counsel that in circumstances such as this, in which the class representatives and defendants seek approval of a settlement negotiated before class certification, judicial scrutiny is particularly exacting. Bluetooth, 654 F.3d at 946 ("[W]here, as here, a settlement agreement is negotiated prior to formal class certification . . ., [the] agreements must withstand an even higher level of scrutiny for evidence of collusion or other conflicts of interest than is ordinarily required under Rule 23(e) before securing the court's approval as fair."). That the parties came to terms during a mediation with an experienced mediator, although "a factor weighing in favor of a finding of non-collusiveness," is "not on its own dispositive." Id. at 948, 939 (reversing district court's approval of a class settlement even though settlement was reached during a "formal mediation session, overseen by a retired California Court of Appeal Justice."). Moreover, the fact that the settlement agreement contains a "clear sailing" arrangement, in which defendants agree not to contest the class counsels' application for attorneys' fees, "which carries [with it] `the potential of enabling a defendant to pay class counsel excessive fees and costs in exchange for counsel accepting an unfair settlement on behalf of the class,'" also invites increased judicial scrutiny. Id. at 947 (quoting Lobatz v. U.S. W. Cellular of Cal., Inc., 222 F.3d 1142, 1148 (9th Cir. 2000)).
As discussed at the preliminary hearing, the parties will need to provide the court additional evidence before the settlement is finally approved. For example, the parties need to provide a more detailed explanation regarding the minimum payout provision in section 6.1 of the settlement agreement. While at the hearing, the parties' counsel represented that the unclaimed 40 percent will revert to defendant should the amounts claimed not rise to the level of 60 percent, the court needs further explanation as to why reversion of funds to defendant is proper as opposed to some other distribution benefiting the class, and why 60 percent is a reasonable minimum payout percentage under the circumstances of this case. See Six (6) Mexican Workers v. Arizona Citrus Growers, 904 F.2d 1301, 1308 (9th Cir. 1990) (reverter provision of unclaimed funds to a defendant may be improper under certain circumstances, with cy pres award or escheat to government as options). In doing so, the parties need to present more than counsel's bare declarations. See Bluetooth, 654 F.3d at 948 ("[T]he district court should have pressed the parties to substantiate their bald assertions with corroborating evidence.").
In addition, the following questions should be answered:
First, how is the amount requested ($10,000) for the class administrator reasonable in light of the small class size?
Second, how does the settlement amount relate to the merits of the class members' individual claims? The parties should submit mediation statements and explain how the settlement amount was reached.
Third, the parties have stated that plaintiff has settled his individual claims as well. Under Rule 23(e), "counsel must submit to the court . . . a statement identifying any agreement made in connection with the" proposed class "settlement[s], including all agreements and undertakings `that, although seemingly separate, may have influenced the terms of the settlement[s] by trading away possible advantages for the class in return for advantages for others. Doubts should be resolved in favor of identification.'" MANUAL FOR COMPLEX LITIGATION, supra, § 21.631 (quoting FED. R. CIV. P. 23(e)(2) advisory committee note). The parties should provide a copy of plaintiff's individual agreement. To the extent a copy of the agreement "might raise confidentiality concerns," the parties may claim any applicable protections and request that the court "receive information about such agreement[] in camera." Id. The local rules address procedures for seeking in camera review.
Fourth, provisions 7.3 and 10.3 of the settlement agreement provisions contemplate that if certain class members do not receive a notice packet because for instance, the notice packets are returned as undeliverable, those members will not receive a payment, and yet they will release their claims. (ECF 25.) This aspect of the settlement agreement may not sufficiently protect absent class members' due process rights. See Lusby v. Gamestop Inc., ___ F.R.D. ___, 2013 WL 1210283, at *11 (N.D. Cal. Mar. 25, 2013) (finding the "aspect of the Settlement Agreement does not give due process to Class Members who are known not to have received notice of the Settlement Agreement, and yet are bound by its terms"). The parties should be prepared to explain how these provisions comply with the fairness requirement.
Final approval will not issue without resolution of the court's concerns. Because the court finds that the settlement terms are, at this time, "within the range of possible approval," Murillo, 266 F.R.D. at 479, the court grants preliminary approval of the proposed settlement.
For 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." FED. R. CIV. P. 23(c)(2)(B). Such notice must describe, "in plain, easily understood language:"
Id.
The court has reviewed the "Notice of Pendency of Class Action and Proposed Settlement" (ECF No. 25, Ex. 2.) and finds that it fully conforms with due process and the applicable Rule. See FED. R. CIV. P. 23(c)(2)(B).
The proposed notice is appropriate because it adequately describes the terms of the settlement with one exception; it should correct the amount to be paid to the class administrator to read "up to $10,000." It also informs the class about the allocation of attorneys' fees, and will provide specific and sufficient information regarding the date, time, and place of the final approval hearing. See Vasquez v. Coast Valley Roofing, Inc., 670 F.Supp.2d 1114, 1126-27 (E.D. Cal. 2009).
Additionally, in light of the small class size, 51 members, the mode of delivery of notice is sufficient; at the hearing, the parties represented that the vast majority of the class members still work for defendant. "The parties have agreed to use a neutral third party Claims Administrator, Simpluris, Inc., to administer the [s]ettlement." (ECF 24 ¶ 20.) Paragraph 10.2 of the parties' stipulation provides:
(ECF 25.)
For the foregoing reasons, and as proposed, the notice and the mode of notice are appropriate.
In light of counsel's experience in wage and hour class action litigation, the court appoints Labor Law Office, a professional corporation, as class counsel.
The court adopts the following proposed deadlines:
For the foregoing reasons, plaintiff's motion for preliminary approval of class action settlement is GRANTED as follows:
IT IS SO ORDERED.
