Case Name: Davis Zirpolo v. UAG Stevens Creek II, Inc., et al.
Case No.: 17-CV-313457

This is a putative wage and hour class action by employees of defendant UAG Stevens Creek II, Inc. and other automobile dealers in the Penske Automotive Group. Before the Court is plaintiff’s unopposed motion for preliminary approval of a class settlement.

I. Factual and Procedural Background

Defendants operate as dealers of new and used automobiles, provide parts and services through their repair departments, and offer automobile financing through Audi Financial Services. (Second Amended Class Action Complaint (“SAC”), ¶ 2.) Plaintiff was employed by defendant UAG Stevens Creek II, Inc. in California as an automobile salesperson from September 2015 to November 2017. (Id. at ¶ 3.) He brings this action on behalf of a putative class of employees who received wages in the form of commissions and/or draws on commissions.

Plaintiff alleges that, although he was entitled to be paid minimum and overtime wages and to off-duty meal and rest periods, he was not compensated as required by California law or provided with the required breaks. (SAC, ¶¶ 3, 8-12.) Plaintiff was paid only commissions and bonus wages for certain pay periods, and if he failed to earn the minimum hourly rate for a pay period, defendant paid him a draw against future advanced commissions. (Id. at ¶ 3.) Plaintiff and other class members were also required to report to work without being provided with at least half of their scheduled day’s work, and were not reimbursed for required business expenses. (Id. at ¶¶ 13-15.) These policies were dictated by the Penske Automotive Group as the parent company of the other defendants and applied to all of the class members. (Id. at ¶¶ 3-4.)

Plaintiff filed this action on July 24, 2017 against defendant UAG Stevens Creek II, Inc. On January 2, 2018, he filed the SAC, adding additional defendants and asserting claims for (1) unfair competition, (2) failure to pay minimum wages, (3) failure to pay overtime wage, (4) failure to provide accurate itemized wage statements, (5) failure to reimburse employees for required expenses, (6) failure to timely pay wages when due, and (7) violation of the Private Attorneys General Act (“PAGA”).

The parties have reached a settlement. Plaintiff now moves for an order preliminarily approving the settlement, provisionally certifying the settlement class, approving the form and method for providing notice to the class, and scheduling a final fairness hearing.

II. Legal Standard for Approving a Class Action Settlement

Generally, “questions whether a settlement was fair and reasonable, whether notice to the class was adequate, whether certification of the class was proper, and whether the attorney fee award was proper are matters addressed to the trial court’s broad discretion.” (Wershba v. Apple Computer, Inc. (2001) 91 Cal.App.4th 224, 234-235, citing Dunk v. Ford Motor Co. (1996) 48 Cal.App.4th 1794.)

In determining whether a class settlement is fair, adequate and reasonable, the trial court should consider relevant factors, such as the strength of plaintiffs’ case, the risk, expense, complexity and likely duration of further litigation, the risk of maintaining class action status through trial, the amount offered in settlement, the extent of discovery completed and the stage of the proceedings, the experience and views of counsel, the presence of a governmental participant, and the reaction of the class members to the proposed settlement.

(Wershba v. Apple Computer, Inc., supra, 91 Cal.App.4th at pp. 244-245, internal citations and quotations omitted.)

The list of factors is not exclusive and the court is free to engage in a balancing and weighing of factors depending on the circumstances of each case. (Wershba v. Apple Computer, Inc., supra, 91 Cal.App.4th at p. 245.) The court must examine the “proposed settlement agreement to the extent necessary to reach a reasoned judgment that the agreement is not the product of fraud or overreaching by, or collusion between, the negotiating parties, and that the settlement, taken as a whole, is fair, reasonable and adequate to all concerned.” (Ibid., quoting Dunk v. Ford Motor Co., supra, 48 Cal.App.4th at p. 1801, internal quotation marks omitted.)

The burden is on the proponent of the settlement to show that it is fair and reasonable. However “a presumption of fairness exists where: (1) the settlement is reached through arm’s-length bargaining; (2) investigation and discovery are sufficient to allow counsel and the court to act intelligently; (3) counsel is experienced in similar litigation; and (4) the percentage of objectors is small.”

(Wershba v. Apple Computer, Inc., supra, 91 Cal.App.4th at p. 245, citing Dunk v. Ford Motor Co., supra, 48 Cal.App.4th at p. 1802.) The presumption does not permit the Court to “give rubber-stamp approval” to a settlement; in all cases, it must “independently and objectively analyze the evidence and circumstances before it in order to determine whether the settlement is in the best interests of those whose claims will be extinguished,” based on a sufficiently developed factual record. (Kullar v. Foot Locker Retail, Inc. (2008) 168 Cal.App.4th 116, 130.)

III. Settlement Process

According to a declaration by plaintiff’s counsel, defendant UAG Stevens Creek II, Inc. provided plaintiff with payroll and employment data and other information regarding the class members for plaintiff’s analysis. Plaintiff’s expert prepared a damage valuation and the parties participated in a full day of mediation with Hon. William J. Cahill on November 13, 2017. Judge Cahill made a mediator’s proposal, which was accepted by the parties.

After the mediation, defendant provided plaintiff with confirmatory discovery regarding the class size, class pay periods, and estimated damages, which plaintiff has reviewed. The parties have now formalized their settlement in the agreement before the Court.

IV. Provisions of the Settlement

The $3,275,000 non-reversionary settlement includes a $25,000 payment to the California Labor and Workforce Development Agency associated with plaintiff’s PAGA claim (seventy-five percent of the $33,333 allocated to PAGA penalties). Attorney fees of up to $1,091,666 (one-third of the gross settlement), litigation costs not to exceed $15,000, and administration costs estimated at $25,000 will also be paid from the gross settlement. The named plaintiff will seek an enhancement award of $10,000. Defendants will pay their share of any payroll taxes separately, without reducing the settlement fund.
The net settlement will be distributed to class members pro rata based on the number of pay periods worked by each class member during the class period. Class members will not be required to submit a claim to receive their payments. Checks uncashed after 180 days will be voided and the associated funds will be paid to the Department of Industrial Relations Unpaid Wage Fund in the class members’ names. By the Court’s calculation, the average settlement payment will be $1,204.76, given the 1,750 estimated class members and estimated net settlement of $2,108,334.

Class members who do not opt out of the settlement will release all claims “that occurred during the Class Period that were pled or could have been pled based upon the facts in the Action to the extent they relate to the Class Members,” including but not limited to specified claims under the Labor Code and related authorities.

V. Fairness of the Settlement

Plaintiff’s damages expert determined that the maximum potential damages in this action are $20,579,688, using class members’ median hourly wage of $26.45. Plaintiff’s expert calculated $18,438,395 in exposure for unpaid rest periods, assuming five violations per week per class member. Overtime damages are estimated at $166,425, and, assuming one violation per pay period as plaintiff experienced, meal period exposure is $1,974,968. In a supplemental declaration filed at the Court’s direction, plaintiff’s counsel explains that the claims for minimum wage violations, reporting time pay, and unreimbursed business expenses were determined to have little to no value. The settlement thus represents 16 percent of the maximum value of the case.

Plaintiff further explains that class members were required to sign arbitration agreements with class action waivers, which would preclude a classwide recovery without defendant’s cooperation. Defendant would also argue that plaintiff’s PAGA claim is subject to arbitration under Esparza v. KS Industries, L.P. (2017) 13 Cal.App.5th 1228. Particularly in light of these challenges, the settlement appears to achieve a very good result for the class.

Counsel believes that the settlement is fair and reasonable to the class, and, based on the analysis above, the Court agrees. Prior to final approval, plaintiff shall provide a declaration detailing his participation in the case supporting the stipulated incentive payment. The Court also has an independent right and responsibility to review the requested attorney fees and award only so much as it determines to be reasonable. (See Garabedian v. Los Angeles Cellular Telephone Co. (2004) 118 Cal.App.4th 123, 127-128.) While 1/3 of the common fund for attorney fees is generally considered reasonable, counsel should submit lodestar information prior to the final approval hearing in this matter so the Court can compare the lodestar information with the requested fees. (See Laffitte v. Robert Half Intern. Inc. (2016) 1 Cal.5th 480, 504 [trial courts have discretion to double-check the reasonableness of a percentage fee through a lodestar calculation].)

VI. Proposed Settlement Class

Plaintiff requests that the following settlement class be provisionally certified:

All individuals who are or were involved in selling goods and/or services who are or were employed by the Dealerships for Defendant and the Related Parties in the state of California during any portion of the Class Period (July 1, 2013 to December 31, 2017) who received wages in the form of commissions and/or draws against commissions, including but not limited to vehicle salespersons, internet salespersons, BDC representatives, fleet salespersons, closers, assistant sales managers, finance salespersons (finance writers/finance managers), service salespersons (advisors/writers), parts salespersons, store admin, delivery agent, and rental sales. The Class excludes employees who were paid on an hourly basis, except that the Class includes parts counter sales people who were also regularly paid a commission and people who were also regularly paid a commission as salespeople at Mini of San Diego.

A. Legal Standard for Certifying a Class for Settlement Purposes

Rule 3.769(d) of the California Rules of Court states that “[t]he court may make an order approving or denying certification of a provisional settlement class after [a] preliminary settlement hearing.” California Code of Civil Procedure Section 382 authorizes certification of a class “when the question is one of a common or general interest, of many persons, or when the parties are numerous, and it is impracticable to bring them all before the court ….” As interpreted by the California Supreme Court, Section 382 requires the plaintiff to demonstrate by a preponderance of the evidence (1) an ascertainable class and (2) a well-defined community of interest among the class members. (Sav-On Drug Stores, Inc. v. Superior Court (Rocher) (2004) 34 Cal.4th 319, 326, 332.)

The “community-of-interest” requirement encompasses three factors: (1) predominant questions of law or fact, (2) class representatives with claims or defenses typical of the class, and (3) class representatives who can adequately represent the class. (Ibid.) “Other relevant considerations include the probability that each class member will come forward ultimately to prove his or her separate claim to a portion of the total recovery and whether the class approach would actually serve to deter and redress alleged wrongdoing.” (Linder v. Thrifty Oil Co. (2000) 23 Cal.4th 429, 435.) The plaintiff has the burden of establishing that class treatment will yield “substantial benefits” to both “the litigants and to the court.” (Blue Chip Stamps v. Superior Court (Botney) (1976) 18 Cal.3d 381, 385.)

In the settlement context, “the court’s evaluation of the certification issues is somewhat different from its consideration of certification issues when the class action has not yet settled.” (Luckey v. Superior Court (Cotton On USA, Inc.) (2014) 228 Cal.App.4th 81, 93.) As no trial is anticipated in the settlement-only context, the case management issues inherent in the ascertainable class determination need not be confronted, and the court’s review is more lenient in this respect. (Id. at pp. 93-94.) However, considerations designed to protect absentees by blocking unwarranted or overbroad class definitions require heightened scrutiny in the settlement-only class context, since the court will lack the usual opportunity to adjust the class as proceedings unfold. (Id. at p. 94.)

B. Ascertainable Class

“The trial court must determine whether the class is ascertainable by examining (1) the class definition, (2) the size of the class and (3) the means of identifying class members.” (Miller v. Woods (1983) 148 Cal.App.3d 862, 873.) “Class members are ‘ascertainable’ where they may be readily identified without unreasonable expense or time by reference to official records.” (Rose v. City of Hayward (1981) 126 Cal.App.3d 926, 932.)

Here, the estimated 1,750 class members are easily identified based on defendants’ records, and the class definition is clear. The Court consequently finds that the class is numerous and ascertainable.

C. Community of Interest

With respect to the first community of interest factor, “[i]n order to determine whether common questions of fact predominate the trial court must examine the issues framed by the pleadings and the law applicable to the causes of action alleged.” (Hicks v. Kaufman & Broad Home Corp. (2001) 89 Cal.App.4th 908, 916.) The court must also give due weight to any evidence of a conflict of interest among the proposed class members. (See J.P. Morgan & Co., Inc. v. Superior Court (Heliotrope General, Inc.) (2003) 113 Cal.App.4th 195, 215.) The ultimate question is whether the issues which may be jointly tried, when compared with those requiring separate adjudication, are so numerous or substantial that the maintenance of a class action would be advantageous to the judicial process and to the litigants. (Lockheed Martin Corp. v. Superior Court, supra, 29 Cal.4th at pp. 1104-1105.) “As a general rule if the defendant’s liability can be determined by facts common to all members of the class, a class will be certified even if the members must individually prove their damages.” (Hicks v. Kaufman & Broad Home Corp., supra, 89 Cal.App.4th at p. 916.)

Here, common legal and factual issues predominate. Plaintiff’s claims all arise from defendants’ wage and hour practices applied to the similarly-situated class members.

As to the second factor,

The typicality requirement is meant to ensure that the class representative is able to adequately represent the class and focus on common issues. It is only when a defense unique to the class representative will be a major focus of the litigation, or when the class representative’s interests are antagonistic to or in conflict with the objectives of those she purports to represent that denial of class certification is appropriate. But even then, the court should determine if it would be feasible to divide the class into subclasses to eliminate the conflict and allow the class action to be maintained.

(Medrazo v. Honda of North Hollywood (2008) 166 Cal. App. 4th 89, 99, internal citations, brackets, and quotation marks omitted.)

Like other members of the class, plaintiff was employed by one of the defendants and alleges that he did not receive required meal and rest breaks and overtime pay. The anticipated defenses are not unique to plaintiff, and there is no indication that plaintiff’s interests are otherwise in conflict with those of the class.

Finally, adequacy of representation “depends on whether the plaintiff’s attorney is qualified to conduct the proposed litigation and the plaintiff’s interests are not antagonistic to the interests of the class.” (McGhee v. Bank of America (1976) 60 Cal.App.3d 442, 450.) The class representative does not necessarily have to incur all of the damages suffered by each different class member in order to provide adequate representation to the class. (Wershba v. Apple Computer, Inc. (2001) 91 Cal.App.4th 224, 238.) “Differences in individual class members’ proof of damages [are] not fatal to class certification. Only a conflict that goes to the very subject matter of the litigation will defeat a party’s claim of representative status.” (Ibid., internal citations and quotation marks omitted.)

Plaintiff has the same interest in maintaining this action as any class member would have. Further, he has hired experienced counsel. Plaintiff has sufficiently demonstrated adequacy of representation.

D. Substantial Benefits of Class Certification

“[A] class action should not be certified unless substantial benefits accrue both to litigants and the courts. . . .” (Basurco v. 21st Century Ins. (2003) 108 Cal.App.4th 110, 120, internal quotation marks omitted.) The question is whether a class action would be superior to individual lawsuits. (Ibid.) “Thus, even if questions of law or fact predominate, the lack of superiority provides an alternative ground to deny class certification.” (Ibid.) Generally, “a class action is proper where it provides small claimants with a method of obtaining redress and when numerous parties suffer injury of insufficient size to warrant individual action.” (Id. at pp. 120-121, internal quotation marks omitted.)

Here, there are an estimated 1,750 members of the proposed class. It would be inefficient for the Court to hear and decide the same issues separately and repeatedly for each class member. Further, it would be cost prohibitive for each class member to file suit individually, as each member would have the potential for little to no monetary recovery. It is clear that a class action provides substantial benefits both to the litigants and the Court in this case.

In sum, plaintiff has demonstrated that this action is appropriate for class treatment.

VII. Notice

The content of a class notice is subject to court approval. (Cal. Rules of Court, rule 3.769(f).) “The notice must contain an explanation of the proposed settlement and procedures for class members to follow in filing written objections to it and in arranging to appear at the settlement hearing and state any objections to the proposed settlement.” (Ibid.) In determining the manner of the notice, the court must consider: “(1) The interests of the class; (2) The type of relief requested; (3) The stake of the individual class members; (4) The cost of notifying class members; (5) The resources of the parties; (6) The possible prejudice to class members who do not receive notice; and (7) The res judicata effect on class members.” (Cal. Rules of Court, rule 3.766(e).)

Here, the notice describes the lawsuit, explains the settlement, and instructs class members that they may opt out of the settlement or object. The gross settlement amount and estimated deductions are provided, and each class member’s estimated payment and eligible pay periods are stated. Class members are told how to dispute their eligible pay periods and are granted 45 days to request exclusion from the class or submit a written objection.

As directed by the Court, plaintiff submitted a modified class notice stating that class members may appear at the final fairness hearing to make an oral objection without submitting a written objection and correcting typographical errors in the originally-submitted notice. The modified notice is approved.

Turning to the notice procedure, the parties have selected KCC, LLC as the settlement administrator. The administrator will mail the notice packet within 28 days of preliminary approval. Any notice packets returned as undeliverable will be re-mailed within 10 days to any updated address located through the administrator’s reasonable efforts, including specific measures set forth in the settlement agreement.

Given that class members only have 45 days to respond to the notices, the administrator must use the National Change of Address Database to locate updated addresses for class members prior to the initial mailing, to minimize time lost due to re-mailing. With that modification, the notice procedures are appropriate and are approved.

VIII. Conclusion and Order

Plaintiff’s motion for preliminary approval is GRANTED subject to the modification above. The final approval hearing shall take place on July 6, 2018 at 9:00 a.m. in Dept. 1.

The following class is provisionally certified for settlement purposes:

All individuals who are or were involved in selling goods and/or services who are or were employed by the Dealerships for Defendant and the Related Parties in the state of California during any portion of the Class Period (July 1, 2013 to December 31, 2017) who received wages in the form of commissions and/or draws against commissions, including but not limited to vehicle salespersons, internet salespersons, BDC representatives, fleet salespersons, closers, assistant sales managers, finance salespersons (finance writers/finance managers), service salespersons (advisors/writers), parts salespersons, store admin, delivery agent, and rental sales. The Class excludes employees who were paid on an hourly basis, except that the Class includes parts counter sales people who were also regularly paid a commission and people who were also regularly paid a commission as salespeople at Mini of San Diego.

The Court will prepare the order.