SUPERIOR COURT OF CALIFORNIA

COUNTY OF SANTA CLARA

WADE SHUMWAY, an individual, JOHANNA TOVAR, an individual, on behalf of themselves, and on behalf of others similarly situated,

Plaintiff,

vs.

INTUIT, INC., a Delaware corporation, and DOES 1-100, inclusive,

Defendants.

Case No. 18CV330368

TENTATIVE RULING RE: MOTION FOR PRELIMINARY APPROVAL OF CLASS ACTION SETTLEMENT

The above-entitled action comes on for hearing before the Honorable Patricia M. Lucas on February 14, 2020 at 9:00 a.m. in Department 3. The Court now issues its tentative ruling as follows:

I. INTRODUCTION
II.
This is a putative class action brought by plaintiffs Wade Shumway (“Shumway”) and Johanna Tovar (“Tovar”) (collectively, “Plaintiffs”), arising out of various alleged Labor Code violations. According to the allegations of the Second Amended Class Action Complaint (“SAC”), filed on April 2, 2019, defendant Intuit, Inc. (“Defendant”) has a program of unlawfully rounding employee time to the nearest five minutes, resulting in underpayment of all wages owed. (SAC, ¶ 16.) Intuit also has a program in which it sets aside a percentage of base payroll totaling millions of dollars to fund its “Spotlight Program.” (Id. at ¶ 18.) The Spotlight Program is an employee recognition program pursuant to which certain employees receive bonuses. (Id. at ¶ 19.) Defendant does not include these bonuses in the regular rate of pay. (Id. at ¶ 22.)

The SAC sets forth the following causes of action: (1) Failure to Pay all Minimum and Overtime Wages (by Shumway and Tovar); (2) Failure to Pay all Overtime Wages Due to Miscalculation of the Regular Rate of Pay (by Shumway and Tovar); (3) Failure to Provide Accurate Itemized Wage Statements (by Shumway); (4) Failure to Pay all Wages When Due (by Shumway and Tovar); (5) Violation of California’s UCL (by Shumway and Tovar); and (6) PAGA (by “Plaintiff”).

The parties have reached a settlement. Although the notice of motion mistakenly titles the motion one for “final approval”, Plaintiffs now move for preliminary approval of the settlement.

III. LEGAL STANDARD
IV.
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, citing Dunk, supra, 48 Cal.App.4th at p. 1801 and Officers for Justice v. Civil Service Com’n, etc. (9th Cir. 1982) 688 F.2d 615, 624.)

“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, supra, 48 Cal.App.4th at p. 1801 and Officers for Justice v. Civil Service Com’n, etc., supra, 688 F.2d at p. 625, 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, supra, 48 Cal.App.4th at p. 1802.)

V. DISCUSSION
VI.
A. Provisions of the Settlement
B.
The case has been settled on behalf of the following two subclasses:

1. “Prior Release” subclass (“PR Class Members”) comprised of 211 former hourly, non-exempt employees who worked for Defendant in California and signed release agreements sent by Defendant in February 2019 related to some of the claims in this lawsuit in exchange for a $150 payment; and
2.

3. “No Prior Release” subclass (“NPR Class Members”), comprised of all hourly, non-exempt employees employed by Intuit in California from June 20, 2014, through the Preliminary Approval Date who have not previously signed any release covering the claims alleged in the Action.
4.

(Declaration of Craig M. Nicholas in Support of Plaintiffs Wage Shumway and Johanna Tovar’s Motion for Preliminary Approval of Class Settlement (“Nicholas Decl.”), Ex. 1 (“Settlement Agreement”), ¶ 1.4.)

The settlement states Defendant will pay a total of $2,400,000. (Settlement Agreement, ¶ 1.42.) This amount includes a monetary payment component totaling $1,864,650 to be paid by Defendant, a prior payment component of $235,350 that Defendant previously paid in February 2019 in an effort to resolve the case, and a prospective relief component/credit valued by the parties at $300,000 attributable to Defendant’s decision to include the value of spotlight awards in its employees’ regular rate calculations from and after January 2019. (Ibid.) The monetary payment component of the settlement includes attorneys’ fees of $800,000, costs of $20,000, settlement administration costs of $30,000, service awards of $20,000 ($10,000 for each class representative), and a PAGA award of $60,000 ($45,000 of which will be paid to the LWDA. (Id. at ¶¶ 4.2.1-4.2.4.) Checks not cashed for 120 days from the date of issuance will become void and the unclaimed funds will be transmitted to the State of California Controller’s Office, Unclaimed Property Fund. (Id. at ¶ 4.2.5.)

C. Fairness of the Settlement
D.
Plaintiff asserts the settlement is fair, adequate, and reasonable. The settlement was reached after two non-consecutive days of mediation and after the parties had engaged in extensive discovery. Overall, the Court finds the settlement is fair. It provides for some recovery for each class member and eliminates the risk and expense of further litigation.

E. Incentive Award, Fees, and Costs
F.
Plaintiffs request class representative incentive awards of $10,000 for each of the two class representatives – Wade Shumway and Johanna Tovar.

The rationale for making enhancement or incentive awards to named plaintiffs is that they should be compensated for the expense or risk they have incurred in conferring a benefit on other members of the class. An incentive award is appropriate if it is necessary to induce an individual to participate in the suit. Criteria courts may consider in determining whether to make an incentive award include: 1) the risk to the class representative in commencing suit, both financial and otherwise; 2) the notoriety and personal difficulties encountered by the class representative; 3) the amount of time and effort spent by the class representative; 4) the duration of the litigation and; 5) the personal benefit (or lack thereof) enjoyed by the class representative as a result of the litigation. These “incentive awards” to class representatives must not be disproportionate to the amount of time and energy expended in pursuit of the lawsuit.

(Cellphone Termination Fee Cases (2010) 186 Cal. App. 4th 1380, 1394-1395, quotation marks, brackets, ellipses, and citations omitted.)

Prior to the final approval hearing, the class representatives shall submit declarations detailing their participation in the action.

The Court also has an independent right and responsibility to review the requested attorneys’ fees and only award so much as it determines reasonable. (See Garabedian v. Los Angeles Cellular Telephone Co. (2004) 118 Cal.App.4th 123, 127-128.) Plaintiffs’ counsel will seek attorneys’ fees of $800,000 (one-third of the total settlement fund). While one-third of the common fund for attorneys’ fees is generally considered reasonable, Plaintiff’s counsel should submit lodestar information (including hourly rates and hours worked) prior to the final approval hearing in this matter so the Court can compare the lodestar information with the requested fees.

G. Conditional Certification of Class
H.
Plaintiffs request the putative subclasses be conditionally certified for purposes of the settlement. 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: (1) an ascertainable class; and (2) a well-defined community of interest among the class members. (Sav-On Drug Stores, Inc. v. Superior Court (2004) 34 Cal.4th 319, 326.)

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. (Sav-On Drug Stores, Inc. v. Superior Court, supra, 34 Cal.4th at p. 326.) “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 (1976) 18 Cal.3d 381, 385.)

As explained by the California Supreme Court,

The certification question is essentially a procedural one that does not ask whether an action is legally or factually meritorious. A trial court ruling on a certification motion determines 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.

(Sav-On Drug Stores, Inc. v. Superior Court, supra, 34 Cal.4th at p. 326, internal quotation marks, ellipses, and citations omitted.)

There are approximately 3,512 class members. Class members can be ascertained from Defendants’ records. There are common issues in this case regarding Defendant’s rounding policy and failure to factor bonuses into the regular rate of pay. No issue has been raised regarding the typicality or adequacy of Plaintiffs as class representatives. In sum, the Court finds that the proposed class should be conditionally certified.

I. Class Notice
J.
The content of a class notice is subject to court approval. “If the court has certified the action as a class action, notice of the final approval hearing must be given to the class members in the manner specified by the court.” (Cal. Rules of Court, rule 3.769(f).)

The notice generally complies with the requirements for class notice. (See Settlement Agreement, Ex. A.) It provides basic information about the settlement, including the settlement terms, and procedures to object or request exclusion. However, while the notice states class members may appear at the final approval hearing to object, the notice also states that class members who fail to submit a timely and valid Notice of Objection shall be deemed to have waived any objections. The notice shall be modified to make clear that objections are not required to be made in writing; class members may appear at the final approval hearing to make objections without providing any prior notice or objection. The amended notice shall be provided to the Court for approval prior to mailing.

VII. CONCLUSION
VIII.
The motion for preliminary approval of class settlement is GRANTED, subject to the modification to the notice. The final approval hearing is set for June 26, 2020, at 9:00 a.m. in Department 3.

The Court will prepare the final order if this tentative ruling is not contested.

NOTICE: The Court does not provide court reporters for proceedings in the complex civil litigation departments. Parties may arrange for a private court reporter to provide services, but those arrangements must be consistent with the local rules and policies posted on the Court’s website.