Case Name: Jesus Chavez v. Hugo Boss Retail, Inc., et al.
Case No.: 18-CV-322644

This is a putative wage and hour class action on behalf of employees of defendant Hugo Boss Retail, Inc. Before the Court is plaintiff’s motion for preliminary approval of a settlement.

I. Factual and Procedural Background

Plaintiff worked as a non-exempt employee at defendant’s retail store in Gilroy from June to November of 2017. (First Amended Class Action Complaint (“FAC”), ¶ 8.) He alleges that he was paid at a rate of $9.00 per hour during his employment in 2017, while the applicable minimum wage was $10.50 per hour as of January 1st of that year. (Id. at ¶ 24.) In addition, plaintiff alleges that non-discretionary commission pay was not included in his regular rate of pay for purposes of calculating his overtime compensation. (Ibid.)

Based on these allegations, plaintiff brings class claims for (1) failure to pay minimum wages in violation of Labor Code sections 1194, 1197, and 1197.1; (2) failure to pay overtime wages in violation of Labor Code sections 510, 558, and 1194; (3) failure to pay rest period premiums in violation of Labor Code section 226.7; (4) failure to pay meal period premiums in violation of Labor Code sections 226.7 and 512; (5) failure to provide accurate itemized wage statements in violation of Labor Code section 226; (6) unfair competition in violation of Business & Professions Code section 17200, et seq.; and (7) violations of Labor Code section 2698, et seq. (the Private Attorneys General Act or “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 Standards for Approving a Class Action/PAGA 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, disapproved of on other grounds by Hernandez v. Restoration Hardware, Inc. (2018) 4 Cal.5th 260.)

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.)

Finally, Labor Code section 2699, subdivision (l) provides that “[t]he superior court shall review and approve any penalties sought as part of a proposed settlement agreement pursuant to” the Private Attorneys General Act (“PAGA”). Seventy-five percent of any penalties recovered under PAGA go to the Labor and Workforce Development Agency (“LWDA”), leaving the remaining twenty-five percent for the aggrieved employees. (Iskanian v. CLS Transportation Los Angeles, LLC (2014) 59 Cal.4th 348, 380.) “[T]here is no requirement that the Court certify a PAGA claim for representative treatment” as in a class action. (Villalobos v. Calandri Sonrise Farm LP (C.D. Cal., July 22, 2015, No. CV122615PSGJEMX) 2015 WL 12732709, at *5.) “[W]hen a PAGA claim is settled, the relief provided … [should] be genuine and meaningful, consistent with the underlying purpose of the statute to benefit the public ….” (Id. at *13.) The settlement must be reasonable in light of the potential verdict value (see O’Connor v. Uber Technologies, Inc. (N.D. Cal. 2016) 201 F.Supp.3d 1110, 1135 [rejecting settlement of less than one percent of the potential verdict]); however, it may be substantially discounted given that courts often exercise their discretion to award PAGA penalties below the statutory maximum even where a claim succeeds a trial (see Viceral v. Mistras Group, Inc. (N.D. Cal., Oct. 11, 2016, No. 15-CV-02198-EMC) 2016 WL 5907869, at *8-9).

III. Settlement Process

According to a declaration by plaintiff’s counsel, after this action was filed, the parties agreed to mediation and defendant produced class data that enabled plaintiff to conduct a full damages analysis. The data included each putative class member’s regular and overtime hours and wages, rates of pay, commissions earned, dates of employment, and meal and rest period premiums. Plaintiff estimated defendant’s total potential liability in the case at $2,157,000, based on a class size of 598.

The parties participated in a mediation with Michael E. Dickstein on September 25, 2018. Although they did not reach a settlement that day, they continued negotiations with the mediator’s assistance and reached a settlement on October 23, 2018 based on a mediator’s proposal.

IV. Provisions of the Settlement

The non-reversionary gross settlement amount is $575,000. Attorney fees of up to $191,666.67 (one-third of the gross settlement), litigation costs not to exceed $25,000, and administration costs estimated at $10,000 will be paid from the gross settlement. $28,750 will be allocated to PAGA penalties, 75 percent of which will be paid to the California Labor and Workforce Development Agency. The named plaintiff will also seek an enhancement award of $7,500.

From the net settlement of approximately $320,085, participating class members will receive a minimum payment of $150, with payments otherwise calculated based on class members’ qualifying work weeks. Class members will not be required to submit a claim to receive their payments. Settlement awards will be allocated 20 percent to wages and 80 percent to interest and penalties, and both the employee’s and the employer’s share of payroll taxes will be paid from the gross settlement. Funds associated with checks uncashed after 180 days will be escheat to the Department of Industrial Wages Unclaimed Wages Fund in the name of the class member. Based on the estimated 598 individuals in the putative class, the average payment to each class member will be $535.26.

Class members who do not opt out of the settlement will release all claims “arising out of the facts and allegations set forth in the Action, or that could have been alleged based on the facts set forth in the Plaintiff’s First Amended Complaint,” including specified wage and hour claims.

V. Fairness of the Settlement

Based on the class data provided by defendant, plaintiff estimates the potential liability in this action to be $334,000 in unpaid minimum wages, $253,000 for rest break violations, $182,000 for overtime wages, $42,000 for meal break violations, $246,000 for wage statement violations, and $1.1 million in waiting time penalties. The settlement thus represents about 26 percent of the potential value of the case.

Plaintiff submits that the settlement is fair and reasonable to the class based on the general risks of litigation and the particular circumstances of this case, including defendant’s position that plaintiff and the rest of the putative class members are subject to a binding arbitration agreement with a class action waiver. The Court agrees with this assessment, particularly considering the risk of no class recovery should defendant invoke its arbitration agreement. The Court also finds that the PAGA allocation provided by the settlement is genuine, meaningful, and reasonable.

The Court retains 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 shall 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 non-exempt employees who were employed by Hugo Boss Retail, Inc. in the State of California at any time between January 31, 2014 to May 20, 2018. The Class excludes time periods prior to August 6, 2015 for any individuals who were members of the class in Pam Rolita Bean v. Hugo Boss Retail, Inc.

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 598 class members have already been identified based on defendant’s records, and the class is clearly defined. The Court finds that the class is numerous, ascertainable, and appropriately defined.

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 defendant’s 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 defendant as a non-exempt employee and alleges that he was not paid the minimum wage and that his non-discretionary commission pay was not included in his regular rate of pay for purposes of calculating overtime. 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 598 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 to both the litigants and the Court in this case.

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. Class members are instructed that they may appear at the final fairness hearing and make an oral objection even if they do not submit a written objection. The gross settlement amount and estimated deductions are provided, along with each class member’s estimated payment. Class members are informed of their qualifying work weeks as reflected in defendant’s records and instructed how to dispute this information. Class members are given 45 days to request exclusion from the class, dispute their workweek information, or submit a written objection. The notice is adequate and is approved.

Turning to the notice procedure, the parties have selected RG/2 Claims Administration, LLC as the settlement administrator. The administrator will mail the notice packet within 10 days of receiving the class data, after updating class members’ addresses using the National Change of Address database. Any notice packets returned as undeliverable will be re-mailed to any forwarding address provided or located through skip tracing. These notice procedures are appropriate and are approved.

VIII. Conclusion and Order

Plaintiff’s motion for preliminary approval is GRANTED. The final approval hearing shall take place on May 10, 2019 at 9:00 a.m. in Dept. 1.

The following class is provisionally certified for settlement purposes:

All non-exempt employees who were employed by Hugo Boss Retail, Inc. in the State of California at any time between January 31, 2014 to May 20, 2018. The Class excludes time periods prior to August 6, 2015 for any individuals who were members of the class in Pam Rolita Bean v. Hugo Boss Retail, Inc.

The Court will prepare the order.