Plaintiff Chad Smith brings this action on behalf of himself and members of the putative class against Defendant Intuit, Inc. alleging that he and members of the putative class were misclassified as exempt employees and regularly worked over 8 hours per day and/or 40 hours per week without overtime “premium pay” as required by the California Labor Code and the Industrial Wage Commission Wage Order 4-2001.  Defendant Intuit, Inc. is a software company known for its tax and accounting programs, TurboTax and Quicken.  Plaintiff was employed with Intuit from August, 2005-December, 2010 and held job titles as “Sr. Systems Engineer,” “Staff Systems Engineer,” “WCG UNIX Systems Engineer,” and “IIT Manager II.”  Plaintiff claims that his duties at Intuit regularly required daily overtime work in excess of 8 hours per day and/or 40 hours per week to meet Intuit’s product release deadlines.  The putative class is defined as “All persons employed at Intuit in California at any time during the period from April 24, 2008 through preliminary approval who (1) were classified as “exempt” and (2) whose job titles included (a) Systems Engineer, (b) Quality Assurance Engineer, (c)Quality Assurance Analyst, (d) Quality Assurance Systems Engineer, (e) Quality Assurance Software Engineer; (3) who did not hold a Staff-level or higher job level; and (4) who, during any year in the Class Period, did not satisfy the DLSE salary requirements under Labor Code 515.5.  Specifically excluded from the Class are those persons who previously entered into a release of claims alleged in the Action.

 

Plaintiff now moves for preliminary approval of the class action settlement.

 

According to the preliminary approval papers, the parties engaged in formal mediation with Mark Rudy, an experienced employment mediator, on April 22, 2014.  At the conclusion of the mediation session, the parties reached an agreement on a settlement in concept and it was memorialized in a memorandum of understanding.  The agreement was later memorialized into a Stipulation and Settlement Agreement of Class Claims which was fully executed on or about October 8, 2014.  The Settlement provides for a gross payment of $1,150,000 and is broken down as follows: (1) Estimated Settlement Administrator expenses of $7500; (2) a $5000 Incentive Award to the named Plaintiff as class representative; (3) up to one-third (33%) of the gross settlement amount as attorney’s fees totaling $383,333.33; (4) a payment of $7500 to the California Labor and Workforce Development Agency for civil penalties pursuant to PAGA; and (5) litigation costs estimated at $16,500.  The Net Settlement Fund is the amount available for distribution after deduction of these items from the Gross Settlement Fund and is estimated to be $730,166.67.

 

The preliminary approval papers describe the manner in which the Net Settlement Fund will be distributed.  The Settlement Administrator will send a Claim Form to all Class Members and each participating Class Members that returns a valid and timely Claim Form will receive a proportional share of the Net Settlement Fund based on the number of weeks worked during the Class Period in relation to the aggregate number of weeks worked by all members of the Class during the Class Period.  Defendant has estimated that there are approximately 92 members of the Class who worked an estimated 9700 weeks through the Class Period.  Based upon these numbers, a Participating Class Member can expect to receive an estimated $75 for each week worked during the Class Period.  If less than all Class Members return a Claim Form and less than 50% of the Net Settlement Fund has been claimed, Intuit guarantees payment of 50% of the Net Settlement Fund to Participating Class Members, up to a maximum individual pay out of tow times the original amount estimated for each Settlement Award Payout.  If the maximum payout to each of the Class Members reaches twice the estimated original amount and some portion of the first 50% remains, that difference will be paid over to the following cy pres entities in equal shares:  the San Diego County Bar Association and the Jumpstart Coalition for Personal Financial Literacy.  Finally, the unclaimed 50% of the Net Settlement Fund shall be available to tax obligations and any amount remaining after the tax obligations are met will be returned to the Defendant.

 

Analysis:  “The well-recognized factors that the trial court should consider in evaluating the reasonableness of a class action settlement agreement include ‘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.]  This list ‘is not exhaustive and should be tailored to each case.’ [Citation.]”  (Kullar v. Foot Locker Retail, Inc. (2008) 168 Cal.App.4th 116, 128.)  “[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.]”  (Dunk v. Ford Motor Co. (1996) 48 Cal.App.4th 1794, 1802.)
Here, the settlement is entitled to a presumption of fairness.  The settlement was reached through arm’s-length bargaining with the assistance of mediator Mark Rudy.  Prior to mediation and settlement, the parties engaged in written and oral discovery and had the opportunity to conduct several informal interviews of class members and obtain documents regarding the number of employees, the weeks worked, the average salary and other information pertaining to the claims at issue.  The case has been litigated over the course of the past two years.  Regarding counsels’ experience, Plaintiff’s counsel submits that he and his firm are involved in numerous class action and complex cases. (Declaration of Isam C. Khoury).

 

“Although [t]here is usually an initial presumption of fairness when a proposed class settlement … was negotiated at arm’s length by counsel for the class, … it is clear that the court should not give rubber-stamp approval.  Rather, 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.  To make this determination, the factual record before the … court must be sufficiently developed… . The proposed settlement cannot be judged without reference to the strength of plaintiffs’ claims.  The most important factor is the strength of the case for plaintiffs on the merits, balanced against the amount offered in settlement.  The court must stop short of the detailed and thorough investigation that it would undertake if it were actually trying the case, but nonetheless it must eschew any rubber stamp approval in favor of an independent evaluation.”  (Kullar, supra, 168 Cal.App.4th at p. 130, internal citations and quotation marks omitted.)

 

Plaintiff’s counsel estimates that Intuit’s maximum potential exposure for the overtime claim is between $2.2 and $3.2 million based on an average of 5-7 hours of overtime per week.  In addition, the derivative claims were evaluated at a maximum of $239,000 and exposure for the penalties under Labor Code Section 226 to be $215,700.  Finally the meals and rest breaks claim had exposure valued at $305,316.  All total, counsel indicates that the value of the overtime and derivative claims was in the range of $3,049,893 to $3,965,893.  The preliminary approval papers set forth the theories of liability against Defendants and why Plaintiff contends that these practices violate California laws regarding overtime and meal and rest break claims.  The papers also summarize the defenses raised by the Defendants and the ultimate fact that there was a substantial risk that the Plaintiff’s might not prevail on the merits on a class-wide basis.  It was because of this risk and expenses associated with prolonged litigation that led Plaintiffs to conclude that settlement was in the best interests of the Class.  Based upon all of the factors set forth in the moving papers and the supporting Declaration, the Court finds that at this preliminary stage, the settlement is the product of good faith, non-collusive, arms length negotiations and is a fair settlement.

 

The Court also has an independent right and responsibility to review the attorney fee provision of the settlement agreement and award only so much as it determines reasonable.  (Garabedian v. Los Angeles Cellular Telephone Co. (2004) 118 Cal.App.4th 123, 127-128.)  Plaintiffs’ counsel seeks a fee award equal to 1/3 of the settlement amount, which is not an uncommon contingency fee allocation.  This award is reasonable under the “common fund” doctrine, which allows a party recovering a fund for the benefit of others to recover attorney’s fees from the fund itself.  (See City and County of San Francisco v. Sweet (1995) 12 Cal.4th 105, 110-111.) In advance of the final approval hearing, Plaintiffs’ counsel should submit evidence to support a lodestar cross-check as a further way of evaluating the reasonableness of the attorney’s fee award.  (See Lealao v. Beneficial Cal. Inc. (2000) 82 Cal.App.4th 19, 46-47.)

 

Regarding class representative awards, “‘[t]he 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.’ [Citation.]  An incentive award is appropriate ‘“if it is necessary to induce an individual to participate in the suit[.]” … [Citation.]’  [Citation.]  ‘[C]riteria 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. [Citations.]’ [Citation.]  These ‘incentive awards’ to class representatives must not be disproportionate to the amount of time and energy expended in pursuit of the lawsuit. [Citation.]”  (Cellphone Termination Fee Cases (2010) 186 Cal.App.4th 1380, 1394-1395.)  The requested $5000 award for the Plaintiff is facially reasonable at this preliminary stage.  Thus, the Court will preliminarily approve the incentive award.  However, in advance of the final approval hearing, Plaintiff and/or Plaintiff’s counsel should submit more detailed evidence on the time and effort Plaintiff spent during the litigation to support the reasonableness of the award.

 

Regarding the class notice procedures, the Court finds that notice to the settlement class by First-Class Mail is reasonably calculated to give due notice.  “The content of a class notice is subject to court approval.  If class members are to be given the right to request exclusion from the class, the notice must include the following:”

 

A brief explanation of the case, including the basic contentions or denials of the parties;
A statement that the court will exclude the member from the class if the member so requests by a specified date;
A procedure for the member to follow in requesting exclusion from the class;
A statement that the judgment, whether favorable or not, will bind all members who do not request exclusion; and
A statement that any member who does not request exclusion may, if the member so desires, enter an appearance through counsel.

 

(Cal. Rules of Court, rule 3.766(d).)  Here, the Notice is Exhibit 1 to the Settlement Agreement and it complies with rule 3.766(d) in all respects.  The Court approves, as to form and content, the class notice and notice procedures.  This approval is contingent upon the Class Notice being sent out to all Class Members by First Class Mail.

 

Plaintiffs also request conditional certification of a settlement class, but the moving papers do not address the requisite factors of provisional certification in any detail.  In other words, the moving papers do not contain any analysis of the issues attendant to provisional certification.  “The party seeking certification has the burden to establish the existence of both an ascertainable class and a well-defined community of interest among class members.  [Citations.]  The ‘community of interest’ requirement embodies three factors: (1) predominant common 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.  [Citation.]  [¶]  The certification question is ‘essentially a procedural one that does not ask whether an action is legally or factually meritorious.’  [Citation.]  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.’  [Citations.]”  (Sav-On, Inc. v. Superior Court (2004) 34 Cal.4th 319, 326.)  In the absence of any meaningful analysis of these factors for provisional certification issues, the Court requests further briefing in order to address these particular issues.

 

A class is ascertainable if it can be readily identified without unreasonable time and expense.  (Rose v. City of Hayward (1981) 126 Cal.App.3d 926, 932.)  The numerosity requirement requires that it is impracticable to join all of the class members all before the court.”  (Miller v. Woods (1983) 148 Cal.App.3d 862, 873.)  “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.  [Citations.]”  (McGhee v. Bank of America (1976) 60 Cal.App.3d 442, 450-451.)  “The test of typicality is whether other members have the same or similar injury, whether the action is based on conduct which is not unique to the named plaintiffs, and whether other class members have been injured by the same course of conduct.”  (Seastrom v. Neways, Inc. (2007) 149 Cal.App.4th 1496, 1502.)  The party moving for class certification must also establish “by a preponderance of the evidence that the class action proceeding is superior to alternate means for a fair and efficient adjudication of the litigation.”  (Washington Mutual Bank v. Superior Court (Briseno) (2001) 24 Cal.4th 906, 914 [class treatment must “provide substantial benefits both to the courts and the litigants”].)

While the Court can certainly draw inferences about such factors as ascertainability and numerosity, it is the burden of the moving party to establish a record for provisional certification and the Court finds the present record inadequate as to the conditional certification factors.

 

This preliminary approval hearing will be continued to Jan. 30, 2015 to allow further briefing on the issue of provisional class certification.  Any further briefing must be submitted no later than Jan. 23, 2015.