Plaintiff’s Daniel Swartout, William Masterson, James Peak and Matthew Scott bring this action on behalf of themselves and members of the putative class against Defendant First Alarm Security Patrol, Inc. alleging various violations of California’s wage and hours laws and failing to provide meal and rest breaks. Specifically, the Third Amended Complaint (“TAC”) includes causes of action for (1) Unfair Competition in Violation of California Business and Professions Code Section 17200; (2) Failure to Pay Minimum Wages and Overtime Wages in Violation of California Labor Code; (3) Failure to Provide Accurate Itemized Wage Statements in Violation of the California Labor Code; (4) Failure to Provide Wages When Due in Violation of the California Labor Code; and (5) Labor Code Private Attorney General Act. The action was initially filed on September 12, 2012 and the TAC was filed on December 19, 2013. The action alleges that Defendant failed to comply with the Labor Code with respect to individuals employed by Defendant as security officers in California. Specifically, Defendant failed to compensate security officers for required training, failed to compensate these employees for all hours worked, failed to provided the legally required meal and rest breaks, and failed to provide accurate wage statements and payment of wages at termination. The putative class is defined as “any current and former non-exempt employees of Defendant who worked as a security officer for Defendant in the State of California from September 11, 2008 to May 7, 2014. According to the moving papers, there are approximately 2452 Class Members.
Plaintiffs now move 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 two separate occasions (August 28, 2013 and March 7, 2014). Although the case did not settle after the first full day of mediation, the parties continued to negotiate with the assistance of Mediator Rudy and at the conclusion of the second day of mediation, the parties reached the framework for settlement and executed a Memorandum of Understanding. The Stipulation and Settlement of Class Action Claims (“The Settlement”) was fully executed on or about September 24, 2014. The Settlement provides for a gross settlement sum of $600,000 and is broken down as follows: (1) a $10,000 Incentive Award to Plaintiff Swartout and $5000 to Named Plaintiffs Masterson, Peak, and Scott; (2) a $10,000 Civil Penalty Fund representing the PAGA penalty payment to be distributed to both the Labor and Workforce Development Agency ($7500) and the rest ($2500) to be included in the calculated payout fund and disbursed on a pro rata basis; (3) up to 25% of the gross settlement amount as attorney’s fees ($150,000); (4) the costs of a Claims Administrator not to exceed $45,000; (5) reasonable litigation costs to be determined by the Court; and (6) the remaining funds (Calculated Payout Fund) to be distributed to Class Members.
The preliminary approval papers include the formula for distribution of the Calculated Payout Fund amongst the Class Members. The total number of weeks worked by all Class Members will be determined from Defendant’s payroll data during the Class Period with the following adjustments: (1) Currently employed Class Members will have their number of weeks worked weighted at 1.0 the actual number of weeks worked; (2) Class Members whose employment was terminated with Defendant shall have their number of weeks worked weighted at 1.5 the actual number of weeks worked; (3) The Calculated Payout Fund will be divided by the total number of weighted weeks worked by Class Members who file valid claims, which will yield the Per Weighted Week amount; and (4) each Class Member who submits a timely and valid Claim Form shall be paid a share of the Calculated Payout Amount based on the number of weighted workweeks he or she has divided by the total number of weighted workweeks by Class Members who submit timely and valid forms. All checks paid to Class Members will remain valid and negotiable for 180 days and following that time frame, any uncashed checks will be deemed void and the unpaid funds will be disbursed to the California Department of Industrial Relations Unpaid Wages Fund in the name of the Class Member.
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 over the course of two full-day mediation sessions taking place several months apart with ongoing investigation and negotiations in the interim. Prior to mediation and settlement, there was some investigation and discovery regarding payroll data, hours worked records, compliance with training requirements and timekeeping records as well as documentation reflecting Defendants’ relevant policies. Defendant also provided information concerning Defendant’s financial ability to pay and Class Counsel also hired a damage expert to prepare a valuation of the claim. The case has been litigated over the course of the past two years. Regarding counsel’s experience, Plaintiff’s counsel submits that he and his firm are involved in numerous class action and complex cases. (Declaration of Norman B. Blumenthal).
“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.)
The moving papers indicate that Plaintiff’s counsel retained a damage expert to calculate the damages for nonpayment of wages and the expert calculated that Defendant had exposure for the alleged overtime compensation in the amount of $1.6 million and the meal period damages had exposure “in excess of $6 million.” While the moving papers and the supporting Declaration set forth the respective strength and weaknesses of the case, it is still somewhat unclear as to the estimated recovery per Class Member from the Calculated Payout Fund. While the Court understands that the formula for distribution is dependent upon a number of variables (weeks worked, how a worked week is weighted, submission of a timely, valid claim form, etc.), the moving papers simply don’t provide the Court with any examples of how it will apply to the average Class Member. Given the number of Class Members and the estimated net amount of the Calculated Payout Fund, the Court needs further information as to how the Settlement will adequately compensate the average Class Member in light of the discrepancy between the net fund and the potential financial exposure to the Defendant. The Court certainly recognizes the risks of litigation, the associated expenses and the legal defense presented to the claims, more information is needed (examples of how the settlement fund would be distributed based upon known numerical data) for the Court to fully assess the fairness issues.
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 25% 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 $10,000 award for Plaintiff Swartout and $5000 to Plaintiff’s Masterson, Peak and Scott are facially reasonable, however, the Court requests further information in the form of Declarations from the named Class representatives as to the specifics of their involvement in this litigation. Thus, the Court will preliminarily approve the incentive awards. However, in advance of the final approval hearing, Plaintiffs and/or Plaintiffs’ counsel should submit more detailed evidence on the time and effort Plaintiffs spent during the litigation to support the reasonableness of the awards.
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 A to the Stipulation and 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. As set forth in the Stipulation and Settlement Agreement, the Settlement Administrator will conduct a skip trace or other search for any Class Member whose Notice is returned as undeliverable.
Plaintiffs also move for provisional certification of a settlement class. “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.)
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”].)
In the immediate case, the proposed settlement class is ascertainable because all Class Members are current or former employees of Defendants who worked in California during the pertinent Class Time Period. The preliminary approval papers indicate that Defendant’s records identify each of the Class Members and the size is approximately 2400 employees which is sufficiently numerous to make joinder impracticable. Plaintiff’s submit that there are sufficient common questions of law and fact that predominate because the proposed Member’s claims relate to Defendant’s policies and practices regarding overtime, minimum wage, rest breaks and issuance of itemized wage statements, etc. Based upon these factors, the Court grants provisional certification of the Class for settlement purposes.
This preliminary approval hearing is being continued by the Court to Jan. 30, 2015 to allow Plaintiffs time to provide additional information and documentation regarding the fairness issues referenced above. The matter is continued to Jan. 30, 2015 at 9 a.m. and any additional documentation should be submitted by Jan. 23, 2015.
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