Case Name: Asya Pereltsvaig v. The Board of Trustees of the Leland Stanford Junior University
Case No.: 17-CV-311521

This is a putative wage and hour class action by teachers in the Continuing Studies program offered by Stanford University. Before the Court is plaintiff’s unopposed motion for preliminary approval of a class settlement.

I. Factual and Procedural Background

Plaintiff alleges that Stanford operates a Continuing Studies program offering courses in liberal arts, creative writing, and professional development for non-degree-seeking adult students. (Second Amended Class Action Complaint (“SAC”), ¶ 19.) The program offers more than 400 courses to more than 16,000 students each year. (Ibid.) Defendant employs plaintiff and other putative class members to teach these courses on a quarter-by-quarter basis, terminating their employment at the end of each quarter. (Id. at ¶ 21.) Instructors are paid a fixed, set salary to teach each course, payable over the quarter for only the time listed in the course catalog. (Id. at ¶ 23.) This salary is typically less than the monthly salary equivalent of two times the minimum wage for full-time employment, with the result that class members do not fall within the professional exemption, or any exemption, of the applicable wage order. (Id. at ¶ 24.)

According to plaintiff, Stanford maintained policies and practices that required class members to perform many uncompensated tasks outside of their listed hours. (SAC, ¶ 25.) Defendant also failed to provide class members with required meal and rest breaks. (Id. at ¶¶ 26-27.) As a result of these violations, Stanford failed to pay class members all compensation due and owing at their termination and to provide them with accurate itemized wage statements. (Id. at ¶¶ 28-32.)

Based on these allegations, the operative SAC asserts claims for (1) failure to pay wages for all hours worked, (2) failure to authorize and permit compliant rest breaks, (3) failure to provide off-duty meal breaks, (4) failure to pay compensation due upon termination, (5) violation of the Unfair Competition Law (“UCL”), (6)-(7) knowing and intentional failure to issue accurate itemized wage statements, and (8) civil penalties under 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, the parties began to communicate regarding the merits of this action and the potential for mediation even before the initial complaint was filed. Stanford informally produced documents to facilitate the mediation, including a class list that identified each pay period in which a class member’s salary fell below two times the minimum wage for full time employment; course catalogs for each quarter during the class period; all versions of the Continuing Studies Handbook in use during the class period; a sample of student course evaluations; a sample of letters of appointment; and plaintiff’s personnel file.

Plaintiff also conducted her own investigation, including by interviewing a number of putative class members and reviewing the responses to a survey sent to approximately 82 instructors. The investigation provided plaintiff with information about the number of hours Continuing Studies teachers spent working on required tasks outside of classroom hours.

On November 15, 2017, the parties participated in a full-day mediation led by Jeffrey Ross. After lengthy negotiations, the mediator proposed an $850,000 settlement, which was accepted by the parties.

IV. Provisions of the Settlement

The non-reversionary settlement includes a $12,750 payment to the California Labor and Workforce Development Agency associated with plaintiff’s PAGA claim (seventy-five percent of the $17,000 allocated to PAGA penalties). Attorney fees of up to $283,333 (one-third of the gross settlement), litigation costs not to exceed $20,000, and administration costs not to exceed $10,500 will also be paid from the gross settlement. The named plaintiff will seek an enhancement award of $7,500.

The $4,250 in PAGA penalties to be retained by the class will be distributed on a per capita basis. The remaining net settlement will be distributed to class members pro rata based on the pay periods when their monthly salary was less than two times the minimum wage for full time employment. Class members will not be required to submit a claim to receive their payments, and plaintiff estimates that the average net recovery will be $1,417. Twenty-five percent of each individual payment will be deemed wages for tax purposes, with the remainder treated as interest and penalties. Stanford will pay the employer’s share of payroll taxes. Funds associated with checks uncashed after 90 days will be directed to a cy pres fund to benefit the Law Foundation of Silicon Valley.

Class members who do not opt out of the settlement will release claims, including unknown claims, “for acts that are either or both (1) alleged in the Action or (2) arise out of the facts, matters, transactions or occurrences set forth in the operative Complaint and could have been alleged as separate claims, causes of action, or other theories of relief.” The release includes, but is not limited to, claims for failure to issue accurate itemized wage statements, unpaid wages, waiting time penalties, meal and rest break violations, restitution for unpaid wages under the UCL, and PAGA penalties.

The settlement further provides that plaintiff will withdraw her appeal in a previously settled class action against Stanford, Lagos v. The Board of Trustees of the Leland Stanford Junior University (Super. Ct. Santa Clara County, No. 2015-1-CV-284784). The final approval of the Lagos settlement over plaintiff’s objection precluded her from asserting a claim for the violation of Labor Code section 226, subdivision (a)(8) in this case.

V. Fairness of the Settlement

In preparing for mediation, plaintiff concluded that there are approximately 364 members of the putative class. Continuing Studies instructors were paid in several installments totaling $5,500 to $7,500 to teach one ten- or five-week course. During many pay periods, salaries fell to an average of $1,376 per pay period or $688 per week: $112 per week less than the exemption threshold. Plaintiff estimates that earnings fell below the exemption threshold during 3,765 pay periods or 7,531 weeks in the class period. Based on interviews and survey responses, plaintiff estimates that class members spent an average of 10 hours per week on tasks beyond their classroom time. Multiplying this time by the 7,531 weeks in which class members were paid less the exemption threshold and applying the $11 minimum wage for Santa Clara County, plaintiff valued the class’s unpaid wages claim at $828,410.

Plaintiff concluded that the meal and rest break claims have little value, at most $16,440. Of the approximately 135 Continuing Studies courses offered each quarter, only 12 one- to two-day seminar-style courses (or 15 classes total) were 6 or 7 hours long, while the rest of the classes were 2.5 hours or shorter. It is unlikely that any of the seminar courses were associated with pay periods in which class members were paid less than the exemption threshold, since the entire salary for these courses of $1,500 or more was typically paid in one pay period. Longer classes were also scheduled with an hour-long break in the middle of the class.

Plaintiff estimated that 1,751 defective wage statements were issued in the year before the initial complaint was filed, supporting a penalty award of $162,350. She estimated the maximum PAGA penalties at $942,000. Finally, assuming that class members were terminated at the end of each quarter, plaintiff estimated waiting time penalties at $3,508,800; however, she did not pursue this theory in mediation since she found no direct authority to support the theory that instructors were terminated each quarter and viewed a large penalty award on this theory as unrealistic. The maximum value of the class claims is therefore estimated at $5,458,000, or $1,949,200 if waiting time penalties are excluded.

Defendant would argue that individual issues regarding class members’ additional compensation and hours worked beyond their classroom time would prevent certification. On the merits, Stanford would contend that 99 percent of courses were repeat courses or workshops requiring little preparation. Accounting for these and other risks, plaintiff views the realistic value of the case as $1,883,544 to $2,166,144. The settlement accordingly represents over fifteen percent of the maximum value of the case and over forty percent of its realistic value. Plaintiff’s counsel submits that the settlement compares favorably with the handful of similar settlements involving uncompensated non-classroom time by instructors of which he is aware.

Plaintiff believes that the settlement is fair and reasonable to the class and, based on the analysis above, the Court agrees. Notably, the settlement achieves a greater recovery than the maximum value of the main substantive claim for unpaid wages. The Court will accordingly grant preliminary approval.

Prior to final approval of the settlement, plaintiff must submit a declaration specifically detailing her 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 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 have been employed as teachers in the Continuing Studies program in California during the Class Period, and who earned less than the monthly salary equivalent to two times the state minimum wage for full time employment during one or more pay periods in the Class Period, excepting those persons who affirmatively opt out.

The Class Period is defined as the period beginning on June 8, 2013 and ending on February 28, 2018.

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 364 class members are easily identified based on defendant’s 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 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 as a Continuing Studies instructor and alleges that she was misclassified as an exempt employee. 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, she 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 364 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.

VI. 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, along with the estimated payment per class member. Class members are instructed to return a challenge form if they disagree with the number of eligible pay periods they worked as reflected on the form. Class members are given 60 days to request exclusion from the class, submit a challenge form, or submit a written objection.

As directed by the Court, plaintiff modified the notice at page six to clarify that class members may appear at the final fairness hearing to make an objection without submitting a written objection. As modified, the notice is approved.

Turning to the notice procedure, the parties have selected ILYM Group LLC as the settlement administrator. The administrator will mail the notice packet within 50 calendar days of preliminary approval, 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 updated address located through skip tracing. These notice procedures are appropriate and are approved.

Prior to final approval, but after the last date to opt out or object, plaintiff shall file a declaration by the administrator addressing the notice process and the incurred and estimated remaining administrative costs.

VII. Conclusion and Order

Plaintiff’s motion for preliminary approval is GRANTED. The final approval hearing shall take place on January 4, 2019 at 9:00 a.m. in Dept. 1.

The following class is provisionally certified for settlement purposes:

All individuals who are or have been employed as teachers in the Continuing Studies program in California during the Class Period, and who earned less than the monthly salary equivalent to two times the state minimum wage for full time employment during one or more pay periods in the Class Period, excepting those persons who affirmatively opt out.

The Class Period is defined as the period beginning on June 8, 2013 and ending on February 28, 2018.

The Court will prepare the order.