Case Number: BC465806    Hearing Date: April 23, 2014    Dept: 58

Final Approval of Class Action Settlement
Department 58
Hon. Rolf M. Treu

Case Name: Allen v. Caine & Wiener Company, Inc.
Case No.: BC465806

Hearing: April 23, 2014

TENTATIVE RULING

Grant final approval of the settlement as fair, reasonable and adequate; and award the following: (1) $45,000 to Class Counsel for attorneys’ fees and costs; (2) $2,500 to Plaintiff Joel Allen for an enhancement award; (3) $5,000 to ILYM Group, Inc. for claims administration costs; and (4) $2,000 to the Labor and Workforce Development Agency.

SUMMARY

On 7/19/11, Plaintiff Joel Allen filed this proposed class action against Defendant Caine & Wiener Company, Inc. arising out of the alleged failure to pay overtime to Plaintiff and a class of non-exempt employees. The Complaint alleges the following claims: (1) Failure to Pay Overtime; (2) Failure to Pay Wages; (3) Unfair Business Practices; (4) Failure to Provide Accurate Itemized Wage Statements; and (5) Private Attorney General Act (“PAGA”) Penalties. On 8/26/11, Defendant filed an answer to the Complaint. On 11/7/12, Plaintiff’s counsel represented that this action was settled at mediation.

This action was assigned to this Court on 3/15/13. On 4/15/13, this Court transferred this action to Dept. 323/CCW for further proceedings including the setting of a motion for preliminary approval of class action settlement. On 5/6/13, Dept. 323/CCW transferred this action back to this Court stating that no motion for preliminary approval had been filed.

On 6/18/13, Plaintiff filed a motion for preliminary approval of class action settlement: the Court granted preliminary approval on 9/27/13. The instant motion for final approval was filed on 4/8/14.

SETTLEMENT CLASS DEFINITION

All persons employed by Defendant in a non-exempt position in California (e.g., Collectors), during the Class Period (7/19/07 to 11/6/12), who worked more than eight (8) hours on at least one workday during the Class Period, but were not paid wages calculated at the overtime rate, excluding those persons who timely request exclusion from the Class, or who previously settled and released their employment-related claims against Defendant.

The class is further divided into a sub-class of Former Employee Settlement Sub-Class who were not employed by Defendant on 11/6/12.

TERMS OF SETTLEMENT AGREEMENT

A copy of the executed Stipulation and Settlement Agreement of Class Action Claims is attached as Exhibit 1 to the declaration of Stephen Harris. Its essential terms are as follows:

• Defendant will pay an aggregate settlement amount not to exceed $150,000 (“Settlement Fund”) which will compensate the class members on a claims-made basis, provide an incentive award, pay Class Counsel’s attorneys’ fees and costs, pay administrative costs, and pay the California Labor and Workforce Development Agency in settlement of the PAGA claim. ¶¶ 33, 50.

• Class Counsel will seek an award of attorneys’ fees and costs not to exceed 30% of the Settlement Fund ($45,000). ¶ 69.

• $2,500 will be paid to Plaintiff as the Class Representative (¶ 71) and Plaintiff will execute a general release and waive the provisions of Civil Code § 1542 (¶¶ 73-74).

• $2,000 will be paid to the California Labor and Workforce Development Agency. ¶ 75.

• The Settlement Administrator will seek an award of administrative costs not to exceed $5,000. ¶¶ 2, 87.

• After deducting the administrative costs, Class Counsel’s fee and expenses, the PAGA payment, and the incentive award from the Settlement Fund, the Net Settlement Fund is to compensate the class members. ¶ 21.

• 2/3 of the Net Settlement Fund is to be allocated to the entire class to be calculated by the ratio of the claimed individual workweeks by each class member during the class period over the total workweeks worked by all class members during the class period. ¶ 59.

• 1/3 of the Net Settlement Fund is to be allocated to the Former Employee Settlement Sub-Class as an additional payment to be calculated by the ratio of the claimed individual workweeks by each sub-class member during the class period over the total workweeks worked by all sub-class members during the class period. ¶ 60.

• There is a guaranteed payout of 50% of the Net Settlement Fund to the class members; if less than 50% of the Net Settlement Fund is claimed, the settlement awards to each class member will be increased on a pro-rata share basis until the total settlement awards payable is equal to 50% of the Net Settlement Fund. ¶ 61. Any remaining unclaimed portions subject to the guaranteed minimum payout shall be retained by and revert to Defendant. ¶ 56.

• Upon final approval of the settlement, all class members (except those who validly excluded themselves) shall be deemed to release and discharge Defendant (and any of their former and present parents, subsidiaries, and affiliates, and their officers, directors, members, managers, heirs, employees, partners, shareholders and agent, and any other successors, assigns, or legal representatives) from any and all claims of every nature and description, whether known or unknown, arising from or related to the claims asserted in this action during the class period. ¶¶ 28-29, 33, 45-46.

ANALYSIS OF SETTLEMENT AGREEMENT
A. 9/27/13 Preliminary Approval

On 9/27/13, the Court noted an ambiguity as to the calculation of the guaranteed minimum payout amount. The Court granted preliminary approval on the understanding that the total minimum payout to the class members would be $47,750 as calculated based on 50% of the difference between the maximum amount of the Settlement Fund ($150,000) less the total maximum payments as to the incentive award, Class Counsel’s attorneys’ fees and costs, administrative costs, and PAGA payment (a maximum of $54,500 which could be less).

B. Standards for Final Fairness Determination

In evaluating the fairness of the settlement, the Court should not “reach any ultimate conclusions on the issues of fact and law which underlie the merits of the dispute. It is well settled that in the judicial consideration of proposed settlements, ‘the [trial] judge does not try out or attempt to decide the merits of the controversy,’ [citation] and the appellate court ‘need not and should not reach any dispositive conclusions on the admittedly unsettled legal issue.’” (Citation omitted.)” 7-Eleven Owners for Fair Franchising v. Southland Corp. (2000) 85 Cal.App.4th 1135, 1146.

Importantly, though, in Clark v. American Residential Services LLC (2009) 175 Cal.App.4th 785, the Second District recently held that the trial court erred in granting final approval of a settlement where “the trial court lacked sufficient information to make an informed evaluation of the fairness of the settlement.” Id. at 790. The Clark court reiterated at length the principles applicable to a court’s final approval of a class settlement as follows:

The trial court must determine whether a class action settlement is fair and reasonable, and has broad discretion to do so. That discretion is to be exercised through the application of several well-recognized factors. The list, which “‘is not exhaustive and should be tailored to each case,’” includes “‘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.’ (Citations omitted.) “ ‘ “The most important factor is the strength of the case for plaintiffs on the merits, balanced against the amount offered in settlement.” ’ ” (Citation omitted.) While the court “‘must stop short of the detailed and thorough investigation that it would undertake if it were actually trying the case,’ ” it “ ‘must eschew any rubber stamp approval in favor of an independent evaluation.’” (Ibid.)

In Dunk [v. Ford Motor Co. (1996) 48 Cal.App.4th 1794], the court observed that “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.” (Citation omitted.) But Kullar [v. Foot Locker Retail, Inc. (2008) 168 Cal.App.4th 116] makes clear that this is only an initial presumption. The point is cogently made in Kullar, where the trial court’s approval of a class action settlement was vacated because the court “[was] not provided with basic information about the nature and magnitude of the claims in question and the basis for concluding that the consideration being paid for the release of those claims represents a reasonable compromise.” (Citation omitted.)(Emphasis added.)

In Kullar, the court pointed out that “neither Dunk … nor any other case suggests that the court may determine the adequacy of a class action settlement without independently satisfying itself that the consideration being received for the release of the class members’ claims is reasonable in light of the strengths and weaknesses of the claims and the risks of the particular litigation.” (Citation omitted.) Kullar continues: “The court undoubtedly should give considerable weight to the competency and integrity of counsel and the involvement of a neutral mediator in assuring itself that a settlement agreement represents an arm’s-length transaction entered without self-dealing or other potential misconduct. While an agreement reached under these circumstances presumably will be fair to all concerned, particularly when few of the affected class members express objections, in the final analysis it is the court that bears the responsibility to ensure that the recovery represents a reasonable compromise, given the magnitude and apparent merit of the claims being released, discounted by the risks and expenses of attempting to establish and collect on those claims by pursuing the litigation. ‘The court has a fiduciary responsibility as guardians of the rights of the absentee class members when deciding whether to approve a settlement agreement.’” (Citation omitted.) (Italics in original.)

Kullar further explains that, while there is usually an initial presumption of fairness when a proposed class action settlement was negotiated at arm’s length by counsel for the class, “‘to protect the interests of absent class members, the court 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.’” (Citation omitted.) To make that determination, “‘the factual record before the … court must be sufficiently developed,’ ” and the initial presumption to which Dunk refers “‘must then withstand the test of the plaintiffs’ likelihood of success.’ ” (Ibid.) Again, “ ‘ “The most important factor is the strength of the case for plaintiffs on the merits, balanced against the amount offered in settlement.” ’ ” (Ibid.) In Kullar, because the trial court was not presented with data permitting it to review class counsel’s evaluation of the sufficiency of the settlement, the order approving the settlement was vacated. (Citation omitted.) As we shall see, the same result is required here.

n8 Kullar points out that, while Dunk asserts there is a presumption of fairness where the four factors it identifies are established, in fact Dunk is fully consistent with “this recognition of the court’s responsibility”; there was a “voluminous record” before the Dunk trial court, which “was made aware of the maximum damages that each class member had sustained and the value of the coupons that each class member would receive under the settlement, as well as of the particular issues that the plaintiffs needed to overcome in order to prevail in the litigation.” (Citation omitted.)

n9 “Whatever information may have been exchanged during the mediation, there was nothing before the court to establish the sufficiency of class counsel’s investigation other than their assurance that they had seen what they needed to see. The record fails to establish in any meaningful way what investigation counsel conducted or what information they reviewed on which they based their assessment of the strength of the class members’ claims, much less does the record contain information sufficient for the court to intelligently evaluate the adequacy of the settlement. Assuming that there is a ‘presumption’ such as Dunk asserts, its invocation is not justified by the present record.” (Citation omitted.)

Clark, 175 Cal.App.4th at 799-800. In finding that the trial court abused its discretion in approving the settlement before it, the Clark court emphasized that “an informed evaluation of a proposed settlement cannot be made without an understanding of the amount that is in controversy and the realistic range of outcomes of the litigation. (Citation omitted.)” Id. at 801. The court also emphasized that “it is the trial court’s duty, whether or not there are objectors, to employ those [Dunk presumption of fairness] factors to evaluate independently the fairness of a proposed settlement.” Id. The Court must have data before it to make such an independent assessment. Id.

C. Clark / Kullar Factors To Consider In Evaluating the Fairness, Adequacy and Reasonableness of the Settlement Agreement

a. Strengths and Weaknesses of Class Claim; Amount in controversy.

This case was filed on behalf of persons who worked for Defendant as non-exempt employees and who were not paid overtime wages and were not provided accurate itemized wage statements.

There were several potential defenses raised by Defendant as to whether employees properly submitted makeup time requests, whether employees were engaged in personal activities when clocking in early or clocking out late, whether employees forgot to clock out when leaving for the day, whether any violation by Defendant was willful, and whether any injury was suffered concerning wage statement violations. Additionally, Defendant continues to assert that its employees have been properly compensated and denies any wrongdoing. Lastly, there may be individualized issues that may have made class certification difficult to obtain.

From Plaintiff’s investigation, Plaintiff estimated the maximum value of the claims as $725,000:

Overtime owed: $25,000
Prejudgment interest: $2,500
Waiting time penalties: $360,000
PAGA penalties: $225,000
Wage statement violations: $112,500

These estimates were based on assuming maximum violation rates, but the risks of non-certification required Plaintiff to significantly discount these values.

b. Risks, Expense, Complexity and Likely Duration of Further Litigation

Continued litigation of this case would involve risks of succeeding at trial on the merits, as well as Defendant’s appealing an unfavorable judgment, in addition to obtaining and maintaining certification of a class.

c. Amount offered in settlement.

The settlement provides for a maximum payment of $150,000. When reducing this amount by the attorneys’ fees and costs (including administration costs), the incentive award, and payment to the California Labor and Workforce Development Agency, there will be a maximum net settlement available to the class of approximately $95,500.

d. Responses and Objections To Notice Of Class Settlement

The class members’ responses are set forth in the declaration of Stephanie Molinai:
Number of settlement class members: 178
Number of undeliverable notices: 21
Number of objections: 0
Number of opt-outs: 1
Number of participating class members: 76 (~42.7% and includes one deficient claim for which additional information was requested)

The total amount claimed is $52,624.75, which meets the guaranteed minimum payout; the estimated average payment is $692.43 with a high of $2,167.16 and a low of $16.48. The class members’ response indicates that the class members’ support for the settlement agreement is good. The claims rate is good for a claims-made settlement, and the lack of any objections is positive. The class members’ response, therefore, supports a finding that the settlement is fair, adequate and reasonable.

e. Conclusion:

The settlement is deemed finally fair, adequate and reasonable. Considering the strengths and weaknesses of the class claims, the risks, expense, complexity and likely duration of further litigation, and the amount in controversy; the settlement provides the class members with a reasonable portion of the total possible damages. The class members support the settlement terms.

D. Attorneys’ Fees and Costs

Class Counsel requests attorneys’ fees and costs of $45,000 (30% of the total settlement amount). Although this is a reasonable contingency fee, the Court is still obliged to ensure that the attorneys’ fee award is anchored in the time actually spent by Class Counsel. Whether an attorney fee is fair, the primary factor for determination is whether the fee bears a reasonable relationship to the value of the attorney’s work. Robbins v. Alibrandi (2005) 127 Cal. App. 4th 438, 451. In fee-shifting cases, the primary method is the lodestar method; and in common fund cases, the primary method is the percentage of the fee method. Apple Computer, Inc. v. Superior Court (Cagney) (2005) 126 Cal. App. 4th 1253, 1270; Thayer v. Wells Fargo Bank, N.A. (2001) 92 Cal. App. 4th 819, 833. Courts have adopted a practice of cross-checking the lodestar against the value of the class recovery because the award is then anchored in the time spent by counsel. Lealao v. Beneficial California, Inc. (2000) 82 Cal. App. 4th 19, 45, fn. 12.

Class Counsel billed a total of 182 hours in this matter. Harris Decl. ¶ 19; Starr Decl. ¶¶ 11-12. This is a reasonable number of hours to have billed on a wage and hour class action matter. They billed at a blended hourly rate of $580. This is reasonable hourly rate considering the experience of Class Counsel. Class Counsel submits that they have incurred costs of $5,302.46. Harris Decl. ¶ 19. Therefore, requested attorney fees and costs are both reasonable and warranted.

E. Incentive Award / Enhancement Fee to Named Plaintiff

[A]n incentive award is appropriate “if it is necessary to induce an individual to participate in the suit,” and have noted ‘relevant factors’ to consider in deciding whether such an award is warranted. (Cook v. Niedert (7th Cir.1998) 142 F.3d 1004, 1016 (Cook).) Those factors include “the actions the plaintiff has taken to protect the interests of the class, the degree to which the class has benefitted from those actions, and the amount of time and effort the plaintiff expended in pursuing the litigation.”

The trial court is not bound to, and should not accept conclusory statements about “potential stigma” and “potential risk,” in the absence of supporting evidence or reasoned argument explaining why, under the particular circumstances, an actual-not a negligible-risk existed, or why it might be difficult to get plaintiffs to come forward to prosecute a particular case.

Clark v. American Residential Services LLC (2009) 175 Cal.App.4th 785, 804, 807. Plaintiff Cabrera applies for a service award of $2,500. Enhancement awards typically range from 0.01-1.67 percent of the total settlement amount, therefore the proposed award falls within this range (.01%). This is a very modest service award which is justified by Plaintiffs assistance by conferring with Class Counsel about the case and providing records and Plaintiff’s knowledge of his work experience. Allen Decl. ¶¶ 4-6. Based on these efforts, Plaintiff is awarded the requested enhancement award.

F. Costs of Claims Administration

The settlement provides that the claims administrator may recover its reasonable costs of administration. ILYM Group, Inc. requests costs of $5,000. Molina Decl. ¶ 17. As the claims administrator, ILYM processed and mailed the notice packets and will process and mail settlement checks and prepare applicable tax reports. Molina Decl. ¶¶ 3, 5-10. Therefore, ILYM is awarded $5,000.