Case Name: Shokoufeh Azima v. CSI Medical Group, et al.

Case No.: 19CV345450

This is a putative class and Private Attorneys General Act (“PAGA”) action on behalf of employees of defendant CSI Medical Group, alleging a number of wage and hour violations. Before the Court is plaintiff’s motion for preliminary approval of a settlement, which is unopposed.

I. Factual and Procedural Background

As alleged in the operative complaint, defendant CSI Medical Group began as the solo dermatologic surgery practice of Greg S. Morganroth, MD in Mountain View, California. (Class Action Complaint, ¶ 2.) Through the merger of over 50 dermatology and cosmetic surgery practices since 2007, CSI has grown into the largest private practice dermatology and plastic surgery medical group in California, with over 360 employees. (Ibid.) Plaintiff was employed by CSI in California as a non-exempt employee from April of 2017 to December of 2018. (Id., ¶ 3.)

Plaintiff alleges that during her employment, defendant failed to include incentive compensation as part of employees’ regular rates of pay for purposes of calculating overtime. (Complaint, ¶¶ 8-10.) In addition, defendant failed to pay minimum wages for non-sales related tasks it directed employees to perform during their work shifts. (Id., ¶ 11.) As a result of their rigorous work schedules, plaintiff and other employees were from time to time unable to take off duty meal breaks, and defendant failed to provide second off-duty meal periods from time to time when employees worked for more than 10 hours. (Id., ¶ 13.) In addition, because defendant paid commission wages only for certain pay periods, it failed to compensate employees for their rest periods as required by the applicable Wage Order and the Labor Code (id., ¶ 14), and it otherwise denied employees proper rest periods due to their rigorous work schedules (id., ¶ 15). Employees were not reimbursed for products they were required to purchase to perform their job duties. (Id., ¶¶ 16-17.) Independently and as a result of these other violations, defendant committed wage statement violations. (Id., ¶ 18.)

Based on these allegations, plaintiff brings putative class claims for (1) violations of Business & Professions Code section 17200 et seq., (2) failure to pay minimum wages, (3) failure to pay overtime wages, (4) failure to provide required meal periods, (5) failure to provide required rest periods, (6) failure to provide accurate itemized wage statements, (7) failure to reimburse business expenses, and (8) failure to pay wages when due, as well as (9) a claim for violation of PAGA.

The parties have now reached a settlement. Plaintiff 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.)

In general, the most important factor is the strength of plaintiffs’ case on the merits, balanced against the amount offered in settlement. (See Kullar v. Foot Locker Retail, Inc. (2008) 168 Cal.App.4th 116, 130.) Still, 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., supra, 168 Cal.App.4th at p. 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” 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 at 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, the parties participated in an all-day mediation with Steve Serratore, Esq. on August 20, 2019. In preparation for the mediation, defendant provided plaintiff’s counsel with necessary information including time and payroll data and information about the composition of the putative class. Counsel analyzed the data with the assistance of a damages expert and prepared and submitted a mediation brief. After the mediation, the parties agreed to the settlement before the Court.

IV. Provisions of the Settlement

The non-reversionary gross settlement amount is $615,000. Attorney fees of up to $205,000 (one-third of the gross settlement), litigation costs not to exceed $20,000, and administration costs of approximately $15,000 will be paid from the gross settlement. $20,000 will be allocated to PAGA penalties, 75 percent of which will be paid to the LWDA. The named plaintiff will also seek an enhancement award of $10,000.

The settlement will be funded $480,000 by defendant and $135,000 by Insperity, Inc., which handled defendant’s payroll. The net settlement of approximately $350,000 will be distributed to individual class members pro rata based on their pay periods worked during the class period. The average settlement payment will be approximately $438.05 to each of the 799 class members, and class members will not be required to submit a claim to receive their payments. Settlement awards will be allocated 10 percent to wages and 90 percent to interest and penalties. Defendant’s share of payroll taxes will be paid separately from the gross settlement. The settlement provides that funds associated with checks uncashed after 180 days will be paid to Children’s Advocacy Institute.

Class members who do not opt out of the settlement will release “all class claims alleged in the Action and the LWDA letter, based on each and every California Labor Code and IWC Wage Order provision cited in the Complaint and LWDA letter, including claims that have or could have been asserted as wage and hour violations based on the factual allegations set forth in the Complaint and which occurred during the Class Period, and expressly excluding all other claims,” including specified non-wage and hour claims.

V. Fairness of the Settlement

Following her investigation, plaintiff estimates that the maximum potential overtime damages from underpayment of the regular rate are only $1,300. Meal period damages are estimated to be $266,259, rest period damages are estimated at $332,000, and damages from unreimbursed business expenses are estimated at $140,000. Thus, total damages for the class claims are at most $739,559. With regard to penalties, plaintiff estimates that waiting time penalties could be worth $1.4 million if overtime violations are included, but would be worth only $250,000 based on meal and rest breaks, while wage statement penalties would be up to $244,000. The PAGA claim was valued at between $1.3 and 1.7 million. The settlement thus represents 83 percent of the maximum damages in the case, and 15 percent of the entire maximum value of the case, including penalties. Plaintiff submits that this outcome is fair and reasonable to the class, particularly considering the uncertainty of recovering the maximum penalties in the case, and the Court is inclined to agree. However, plaintiff does not address the potential value of her claims arising from her allegations that defendant failed to pay minimum wages for non-sales related tasks it directed employees to perform during their work shifts. Plaintiff’s counsel shall file a supplemental declaration addressing this issue, prior to the hearing on this matter if possible.

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 individuals who are or previously were employed by Defendant who worked in California and who were classified as non-exempt during the Class Period [(March 29, 2015 to October 29, 2019)].

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 799 class members have already been identified based on defendant’s records, and the settlement class is clearly defined. The Court finds that the settlement 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 she experienced the violations at issue. The anticipated defenses are not unique to plaintiff, and there is no indication that her 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 799 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. The gross settlement amount and estimated deductions are provided, along with the estimated payment per class member. Class members are given 45 days to request exclusion from the class, submit a written objection, or dispute their workweek information. Class members are instructed that they may appear at the final approval hearing to make an oral objection even if they do not submit a written objection. The form is notice is appropriate and is approved.

Turning to the notice procedure, the parties have selected ILYM Group as the settlement administrator. The administrator will mail the notice packet within 28 days of preliminary approval. Any notice packets returned as undeliverable will be re-mailed to any more current address located through an address search. These notice procedures are generally appropriate and are approved; however, the administrator shall update class members’ addresses using the National Change of Address database prior to the initial mailing.

VIII. Conclusion and Order

Subject to the modification to the notice procedure directed above, as well as counsel’s submission of a supplemental declaration addressing the potential value of plaintiff’s claims arising from her allegations that defendant failed to pay minimum wages for non-sales related tasks, plaintiff’s motion for preliminary approval is GRANTED. The final approval hearing shall take place on June 19, 2020 at 9:00 a.m. in Dept. 1. The following class is preliminarily certified for settlement purposes:

All individuals who are or previously were employed by Defendant who worked in California and who were classified as non-exempt during the Class Period [(March 29, 2015 to October 29, 2019)].

Prior to final approval, plaintiff shall lodge for the Court’s review any individual settlement agreement she may have executed in connection with her employment with defendant.

The Court will prepare the order.