Nataly Arias, et al. v. Santa Barbara Brewing Company, LLC
Case No: 17CV01335
Hearing Date: Mon Jun 17, 2019 9:30

Nature of Proceedings: Motion Approval of Final Class Action Settlement; Motion Attorney’s Fees & Enhancement Awards

CASE: Nataly Arias, et al. v. Santa Barbara Brewing Company, LLC, Case No 17CV01335 (Judge Sterne)

HEARING DATE: June 17, 2019

MATTER:

Motion for Final Approval of Class Action Settlement; Motion for Order Approving Attorney’s Fees and Expenses and Class Representative Enhancement Awards

ATTORNEYS:

Garry M. Tetalman for Plaintiffs and Class

Rafael Gonzalez for Defendant Santa Barbara Brewing Company, LLC

TENTATIVE RULING: Plaintiffs’ motion for final approval of class action settlement and class certification is granted. Plaintiffs’ motion for approval of class counsel’s fees, litigation costs, class representative enhancement awards, and claims administrator fees is granted as set forth herein.

BACKGROUND:

This is a class action wage and hour lawsuit brought by plaintiff Nataly Arias and six other named plaintiffs on behalf of themselves and all current and former employees who worked for defendant Santa Barbara Brewing Company, LLC on an hourly basis at any time from March 24, 2013 through December 3, 2018, the date the court granted preliminary approval of the settlement in the case. Plaintiff’s first amended complaint, the operative complaint, was filed on July 13, 2017, and alleges causes of action for (1) unpaid overtime wages, (2) unpaid meal and break periods, (3) violation of Labor Code Section 226, subdivision (a), (4) conversion of gratuities, (5) unlawful deductions in violation of Labor Code Sections 221-224, (6) violation of Labor Code Section 203, and (7) unfair business practices. Defendant denies that it violated California’s labor laws and further denies that it owes plaintiffs or any other current or former employees any additional wages.

After the action was filed, the parties engaged in an extensive investigation of the facts and the law and conducted formal discovery. Plaintiffs requested production of personnel, time, and payroll records, both for the seven named plaintiffs and for all members of the putative class. Defendant produced substantial documents to plaintiffs, including time and payroll records, personnel policies, and other relevant materials. Both sides also conducted a thorough and realistic assessment of liability, including the risks involved in proceeding as a class action. During settlement discussions, defendant explained that it was experiencing significant financial difficulties and that its ability to contribute towards a settlement was limited. Defendant produced confidential documents to plaintiffs related to its financial condition. Ultimately, the case was settled as a result of arm’s-length and extended negotiations. The parties maintain that the settlement is a reasonable compromise of the disputed claims, given the maximum amount that could have been recovered in the case.

On December 3, 2018, the court granted preliminary approval of the class action settlement and directed the claims administrator, Simpluris, Inc., to mail notice of the proposed settlement to the class members, estimated to be approximately 240 current and former employees of defendant. The court found that the proposed notice of settlement met the legal requirements set forth in Trotsky v. Los Angeles Federal Savings & Loan Association (1975) 48 Cal.App.3d 134, 151-152 in that it outlined what the recipient must do in order to participate in the settlement, to object, or to opt out of the settlement, and the time frame within which each choice had to be made. The court also approved certification of the proposed class for settlement purposes, finding that the class was ascertainable from defendant’s records, that the class was so numerous that joinder of all members was impracticable, that there were questions of law and fact common to the class members, that there was a well-defined community of interest among the class members with respect to the subject matter of the litigation, that the claims of the class representatives were typical of claims of the members of the proposed class, and that the class representatives would fairly and adequately protect the interest of the class members.

The settlement class is defined as:

“All current and former employees who worked for Santa Barbara Brewing Company, LLC on an hourly basis at any time from March 24, 2013 through December 3, 2018.”

(Alcantara Dec., Ex. A, p. 1.)

The settlement agreement approved preliminarily by the court provides that defendant shall pay up to $100,000.00 to resolve the claims alleged in the first amended complaint and that it shall retain a revisionary interest in any unclaimed portion of the settlement funds, subject to a 60% floor. The settlement agreement further provides that plaintiffs’ counsel may request an award of attorney’s fees not to exceed $33,000.00 (33% of the maximum settlement amount) and seek reimbursement of litigation expenses incurred in the action, not to exceed $5,000.00. The settlement agreement also provides that plaintiffs may seek, and defendant will not oppose, a service enhancement payment to the named plaintiffs in an amount not to exceed $7,000.00, total. Finally, the settlement agreement provides that approximately $10,000.00 shall be allocated to compensate the claims administrator for its work in the case.

Plaintiffs now move for an order granting final approval of the class action settlement and class certification, affirming plaintiffs as class representatives, and affirming Garry M. Tetalman as class counsel. In a separate motion, plaintiffs request an order approving class counsel’s fees and costs and the enhancement payments to the class representatives. There is no filed opposition to the motions.

ANALYSIS:

1. Motion for Final Approval of Class Settlement

Settlement of a class action requires approval of the court after hearing. Cal. Rules of Court, Rule 3.769(a). The court has broad discretion whether to approve a proposed settlement. Dunk v. Ford Motor Company (1996) 48 Cal.App.4th 1794, 1801. Factors relevant to the court’s determination include the value of the settlement, the risks inherent in continued litigation, the extent of discovery completed and the state of the proceedings when the settlement was reached, the complexity, expense, and likely duration of the litigation in the absence of a settlement, the experience and views of class counsel, and the response of class members. Wershba v. Apple Computer (2001) 91 Cal.App.4th 224, 244-245. A class action settlement is presumed to be fair and will normally be approved, 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 class members who object is small. 7-Eleven Owners for Fair Franchising v. Southland Corporation (2000) 85 Cal.App.4th 1135, 1146.

On March 28, 2019, Simpluris, Inc. mailed notice of settlement packets to 233 class members. (Alcantara Dec., ¶8.) The notice packets were sent to the last known address of class members, as determined from defendant’s records and as updated by the claims administrator utilizing the National Change of Address Database maintained by the U.S. Post Office. (Alcantara Dec., ¶¶ 7-8.) The notice packets advised the class members of the terms of the settlement and of their right to participate in the settlement and receive a settlement share, object to the settlement and appear at the final approval hearing (the date, time, and place of which were provided), or request to be excluded from the settlement. (Alcantara Dec., Ex. A.) The notice packets also informed the class members of the time by which each of these options needed to be exercised. (Ibid.) For notice packets that were returned by the U.S. Post Office as undeliverable and without a forwarding address, Simpluris, Inc. performed an advanced address search using Accurint, a search program owned by Lexis-Nexis. (Alcantara Dec., ¶9.) Through this advanced search, the claims administrator was able to locate 38 updated addresses and notice packets were promptly mailed to these addresses. (Ibid.) Nine notice packets were ultimately deemed undeliverable. (Ibid.)

During the claims period, Simpluris, Inc. received claim forms from 48 class members who wished to participate in the settlement. (Alcantara Dec., ¶10.) The number of workweeks claimed by the participating class members was 6,489, which represents 43.31% of the total workweeks worked by all class members during the class period. (Ibid.) Only one class member asked to be excluded from the settlement. (Alcantara Dec., ¶13.) No class member objected to the settlement. (Alcantara Dec., ¶14.) The net settlement fund available to pay the claimants is $45,926.31, which was determined by subtracting class counsel’s fee ($33,000.00), litigation costs ($5,000.00), named plaintiffs service award ($7,000.00), employer payroll taxes ($2,748.69), and the claims administrator fee ($6,325.00) from the gross settlement fund of $100,000.00. (Alcantara Dec., ¶11.) A total of $19,890.26 of the net settlement fund has been claimed and an additional $7,665.52 will be allocated to meet the agreed upon floor of 60%. (Alcantara Dec., ¶12.) The average estimated payment will be $574.08, while the highest estimated payment will be $1,225.74. (Ibid.)

The court finds that the settlement agreement in the present case meets all of the legal criteria for final approval:

A. The Value of the Settlement

The $100,000.00 settlement amount is modest for a wage and hour case, but the court recognizes that this results at least in part from the fact that defendant denies any liability or wrongdoing and from the impact defendant’s financial condition has on the amount it could contribute to settle the action. Plaintiffs’ counsel received extensive confidential documentation from defendant that outlined its financial condition and, after reviewing those documents with a bankruptcy specialist to determine the likelihood of defendant declaring bankruptcy and ceasing operations, it was decided to settle the case on the best terms possible that would allow the class members to recover sums that they otherwise would not be able to collect on their own. (Tetalman Dec., ¶20.) Defendant is only one restaurant and its ability to fund a settlement or judgment is limited. (Tetalman Dec., ¶13.) Plaintiffs’ counsel was concerned that if he pursued a settlement that was beyond defendant’s ability to pay, there was a real possibility that bankruptcy would result and neither the class representatives nor the putative class members would receive any compensation in the case. (Tetalman Dec., ¶14.)

Given defendant’s financial situation, the court finds that the settlement is fair, reasonable, and adequate and in the best interests of the named plaintiffs and the putative class members.

B. Risks Inherent in Continued Litigation

Defendant has asserted throughout the litigation that it complied with the California Labor Code and all other applicable laws with respect to its employees. Defendant has also asserted that plaintiffs cannot satisfy the criteria for class certification under Code of Civil Procedure Section 382 because individual issues predominate and no class can be ascertained. While plaintiffs believe that they can prove the claims alleged in the complaint and that the class is sufficiently numerous and the claims sufficiently common to warrant class certification, there are inherent risks involved in litigation. Defendant is represented by the long-time Santa Barbara employment litigation firm of Mullen & Henzell, LLP, 112 E. Victoria Street, Santa Barbara, California 93101. (Tetalman Dec., ¶17.) Also, the areas of the law at issue in the case are always changing and an adverse appellate decision may defeat certification of some or all of claims alleged in the case. In short, continued litigation presents substantial risks, including the risk of maintaining class certification even if it is initially obtained.

C. The Extent of Discovery

Prior to filing the action, plaintiffs’ counsel spent over 100 hours meeting with and interviewing the class representatives and other witnesses and reviewing documents they had to ascertain the validity of the claims and whether class treatment was appropriate. (Tetalman Dec., ¶12.) Plaintiffs’ counsel also served more than 130 requests for production of documents on defendants, seeking, among other things, production of personnel, time, and payroll records for both the individual plaintiffs and all members of the putative class as alleged in the complaint. In the succeeding months, defendant produced hundreds of pages of responsive documents, including time and payroll records, personnel policies, and other relevant documents. Thereafter, the parties met and conferred regarding the document production and engaged in lengthy discussions concerning the facts of the case, the merits of the claims, and defendant’s financial situation, which was of critical importance. (Tetalman Dec., ¶24.) All of this information was used in reaching a settlement.

D. The Complexity and Expense of Continued Litigation

As detailed in the moving papers, employment class action cases are expensive and time-consuming to prosecute. Plaintiffs’ counsel believes that, without a settlement, the litigation could last at least three years, with the substantial possibility that defendant would declare bankruptcy and no longer be in business. (Tetalman Dec., ¶19.) Settlement also avoids the need for a contested class certification motion that would be time consuming and expensive for plaintiffs to file, defendant to oppose, and the court to decide. Although plaintiffs believe that they would have succeeded both as to class certification and liability, litigation always involves risks. (Tetalman Dec., ¶20.) Finally, settlement avoids a lengthy trial that likely would have involved testimony by numerous witnesses and experts. (Ibid.)

E. The Experience and Views of Class Counsel

Plaintiffs’ counsel and defense counsel are experienced attorneys and have litigated many wage and hour class actions. (Tetalman Dec., ¶¶ 5, 17.) The settlement occurred as a result of arm’s-length negotiations, which followed an extensive and detailed review of the facts of the case. (Tetalman Dec., ¶22.) Both sides agree that the settlement is fair and reasonable and in the best interests of the parties given the risks inherent in continued litigation. (Tetalman Dec., ¶23.)

F. The Response of Class Members

No class member has objected to the proposed settlement and only one class member has opted out of the settlement. (Alcantara Dec., ¶¶ 13, 14.) The absence of opposition to the settlement is a strong indication that the class members support the settlement as fair, adequate, and reasonable.

Whether a class action settlement should be approved is left to the sound discretion of the trial court. Dunk v. Ford Motor Company, supra, 48 Cal.App.4th 1794, 1801. In exercising its discretion, the court should give “[d]ue regard . . . to what is otherwise a private consensual agreement between the parties.” Ibid. “The inquiry must be limited to the extent necessary to reach a reasoned judgment that the agreement is not the product of fraud or . . . collusion between the negotiating parties, and that the settlement, taken as a whole, is fair, reasonable and adequate to all concerned.” Ibid. In the present case, the primary allegation is that defendant failed to compensate its employees for all hours worked. Based on the employment and payroll records provided by defendant, plaintiffs were able to estimate the damages in the case. (Tetalman Dec., ¶23.) While the gross settlement fund of $100,000.00 is less than the amount plaintiffs believe is owed in the matter, it represents a fair compromise of disputed claims given defendant’s financial condition and the fact that it denies liability or wrongdoing of any kind. (Tetalman Dec., ¶¶ 18, 20.)

After weighing these considerations, including the fact that no participating class member objected to the settlement, the court finds that the settlement is both fair and reasonable and will grant plaintiffs’ motion for final approval of the settlement and for certification of the class identified above. The settlement provides the class members meaningful relief in a prompt and efficient manner. The court also affirms Nataly Arias, Laurel Baroldy, Sophia Graniela, Cypress Ledesma, Genesis Sarmiento, Bria Taylor-Fowlkes, and Kendall Zoesch as class representatives and Gary M. Tetalman as class counsel. The claims of the class representatives are typical of the class and class counsel has extensive experience in class action wage and hour litigation.

2. Motion for Approval of Attorney’s Fees and Costs

Plaintiffs also seek an award of attorney’s fees. In California, the courts recognize two methods for calculating attorney’s fees in class action cases – the lodestar method and the percentage-of-recovery method. Wershba v. Apple Computer, Inc., supra, 91 Cal.App.4th 224, 254. Under the lodestar method, a base amount is determined by multiplying the number of hours reasonably spent on the matter by a reasonable hourly rate. Ibid. Under the percentage-of-recovery method, the fees are based on a percentage of the award, usually between 30-40%. Ibid. Here, plaintiffs requests attorney’s fees in the amount of $33,000.00, which equals 33% of the gross settlement amount. (Tetalman Dec., ¶27.) A cross-check using the lodestar method of calculation confirms that the requested fees are reasonable as class counsel spent 230 hours over several months working on the matter, which produces a lodestar value of $149,500.00 based on counsel’s regular hourly rate of $650.00 an hour. (Ibid.) The court will therefore award fees to class counsel in the amount of $33,000.00.

In addition to attorney’s fees, the court will award reasonable and necessary litigation costs to plaintiffs in the amount of $5,000.00. (Ibid.) Class counsel’s actual out-of-pocket expenses to date are approximately $6,000.00. (Ibid.) The court will also approve the incentive payment of $1,000.00 to each of the seven class representatives. (Tetalman Dec., ¶30.) The cases have long recognized that it is appropriate in class action litigation to provide an incentive payment to the named plaintiff or plaintiffs for work done on behalf of the class. See, Rodriguez v. West Publishing Corporation (9th Cir. 2009) 563 F.3d 948, 958. Here, the class representatives spent significant time assisting class counsel in the prosecution of the case and providing payroll data and witness contact information. (Ibid.)

Finally, the court will award fees in the amount of $6,325.00 to Simpluris, Inc., the claims administrator, for the work involved in completing the settlement administration. (Alcantara Dec., ¶16.)