Case Name: Meyer v. ThinkTank Learning, Inc.
Case No.: 2015-1-CV-282698

This is a putative employment class action alleging that defendant Thinktank Learning, Inc. misclassified certain employees as exempt. Currently before the Court is plaintiff Dayna Meyer’s motion for preliminary approval of class settlement.

I. Factual and Procedural Background

Thinktank is a college admissions consulting firm that offers “basic subject tutoring and SAT/ACT prep to college consulting.” (First Amended Complaint (“FAC”), ¶ 2.) Plaintiff was employed by Thinktank in California as an Admissions Consultant from October 2012 to August 2014, and was classified as a salaried employee exempt from overtime pay and meal and rest breaks for the duration of her employment. (Id., ¶ 3.) According to the allegations of the complaint, Admissions Consultants engaged in Thinktank’s core, day-to-day business activities by performing a finite set of non-exempt tasks within a defined manual skill set. (Id., ¶¶ 4, 12, 15-17.) Their work schedule was set by Thinktank. (Id., ¶ 7.) ACs were uniformly classified and treated as exempt in violation of California law. (Id., ¶ 19.)

On August 17, 2015, plaintiff filed the operative FAC for (1) unlawful business practices in violation of Business & Professions Code sections 17200, et seq. (the “UCL”), (2) failure to pay overtime compensation as required by the Labor Code, (3) failure to provide accurate itemized statements in violation of the Labor Code, (4) failure to pay wages when due under the Labor Code, and (5) violation of the Private Attorney 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. The Proposed Settlement

A. 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.)

B. Settlement Process

The parties mediated this action before Jeffrey A. Ross, an experienced and respected employment mediator, on March 10, 2016. (Decl. of Norman Blumenthal ISO Mot., ¶ 5.) In preparation for the mediation, Thinktank provided plaintiff’s counsel with records and information for putative class members, which were analyzed with the assistance of damages expert DM&A. (Ibid.) The records included information concerning the AC position, the number of class members, and the workweeks for the class. (Id., ¶ 10.) DM&A calculated that Thintank was subject to a maximum overtime claim of $1.3 million and a maximum unpaid meal period claim of $90,000. (Id., ¶ 6.) During the mediation, Thinktank established that putative class members generally worked fewer overtime hours than DM&A had assumed for purposes of its calculation and received a lunch. (Ibid.) At the conclusion of the mediation, the parties reached an agreement in principle to settle this matter based upon a mediator’s proposal. (Id., ¶ 5.) The gross settlement of $450,000 represents more than 32 percent of the maximum value of the unpaid wages at issue in this case, and more realistically represents 40 to 50 percent of the value of the unpaid wages in light of DM&A’s probable overstatement of those damages. (Id., ¶ 6.)

Thinktank denies any wrongdoing associated with plaintiff’s claims and denies that this action is appropriate for class treatment for any purpose other than settlement. (Blumenthal Decl., ¶ 12.) It contends that plaintiff’s claims do not involve common legal or factual issues to those of the proposed class and she is an inadequate representative, and that class treatment would require the Court to conduct individualized inquiries that would predominate over common questions of law or fact. (Ibid.) Plaintiff’s counsel has previously negotiated settlements involving similar issues and analogous defenses and believes that the settlement is fair, reasonable, adequate, and in the best interest of the putative class in light of the circumstances, including the risk of significant delay, defenses asserted by Thinktank, and numerous potential appellate issues. (Id., ¶ 14.) For example, Thinktank contended that recovery is barred by the “administrative” and “professional” exemptions in Labor Code section 515, and while plaintiff’s counsel believes that these defenses could be overcome, they present a serious risk to recovery. (Id., ¶ 24.) There is also a significant risk that the class would not be certified in light of many appellate decisions denying class certification of a misclassification claim. (Id., ¶ 25.)

C. Provisions of the Settlement

The settlement of $450,000 includes a $10,000 payment to the California Labor and Workforce Development Agency associated with the PAGA claim. (Blumenthal Decl., Ex. 1, Settlement Agreement and Release, ¶ 14.) Settlement administration expenses estimated at $15,000, attorney fees of up to 25 percent, and litigation expenses of up to $15,000 will also be deducted from the gross settlement amount. (Id., ¶ 14, 44(f)-(g).) The net settlement fund shall be disbursed to class members on a pro rata basis based on their total weeks worked as a salaried, exempt Admissions Consultant, as determined by settlement administrator Gilardi & Co. based on Thinktank’s employment records. (Id., ¶¶ 44(d), 45.) The amount of this potential award will be listed on the class notice for each individual class member, and class members may challenge the number of workweeks reflected, with the administrator resolving such challenges after consulting with the parties. (Ibid.)

In exchange for the settlement payments, class members will release any and all claims that were or could have been brought based on the facts or claims alleged in the complaints in this action arising during the class period. (Settlement Agreement, ¶ 23.)

Plaintiff will receive an award of $7,500 from the gross settlement fund for her services as class representative in exchange for a broader general release of her potential claims. (Settlement Agreement, ¶ 44(h).)

D. Analysis

In light of the above, it appears that the settlement amount is fair and will be fairly apportioned among class members based on their hours worked. The settlement was reached through arm’s-length bargaining following sufficient investigation and discovery, and both plaintiff’s counsel and the mediator are experienced in class action litigation. The recovery of one-third to one-half the estimated value of the claims is a good result for the class. The Court is thus inclined to deem the settlement fair.

Prior to final approval of the settlement, plaintiff must submit a declaration specifically detailing her participation in the case supporting the stipulated $7,500 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 25 percent of the common fund for attorney fees is generally considered reasonable, counsel should submit billing records and lodestar information prior to the final approval hearing in this matter so the Court can compare the lodestar information with the requested fees.

III. Proposed Settlement Class
Plaintiff requests that the following settlement class be provisionally certified: “All individuals who are or previously were employed by Defendant ThinkTank Learning, Inc. as Admissions Consultants in California, who were classified as exempt from July 6, 2011, through the earlier of the date of Preliminary Approval or August 31, 2016.” (Settlement Agreement, ¶ 4.) “Admissions Consultants” include both employees who had this job title and those employed “in a position that primarily performed the duties of an Admissions Consultant, such as EA Consultant, Education Consultant, or Consultant.” (Id., ¶ 3.)

A. Legal Standard

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., 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., 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, it would appear to be a simple matter to identify individuals employed by Thinktank as “Admissions Consultants.” However, plaintiff does not explain how she will identify additional class members who “primarily performed the duties of an Admissions Consultant.” With respect to the additional positions encompassed by that portion of the class definition—“ EA Consultant, Education Consultant, or Consultant”—it is unclear whether all or only some individuals employed in those positions during the class period will be members of the class. Consequently, plaintiff must submit supplemental briefing addressing this issue before the Court will provisionally certify the class and approve the settlement.

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, at least with respect to Admissions Consultants, common legal and factual issues predominate. Plaintiff’s claims all arise from Thinktank’s alleged misclassification of workers in this position, and Thinktank’s assertion that these workers fall within the “administrative” and/or “professional” exemptions in Labor Code section 515 also raises common issues.

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.) Here, like other members of the class, plaintiff was employed as an Admissions Consultant and was classified as exempt. Thinktank’s 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. Again, at least with respect to those members of the class who are or were Admissions Consultants, 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 82 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 with respect to Admissions Consultants. However, the proposed class definition also includes individuals employed “in a position that primarily performed the duties of an Admissions Consultant, such as EA Consultant, Education Consultant, or Consultant.” It is not clear how these individuals will be identified and whether the community of interest factors are satisfied as to them. The Court will consequently direct plaintiff to submit supplemental briefing on this issue.

IV. 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 receive a payment, opt out of the settlement, or object. The gross settlement amount is set forth along with itemized estimated deductions resulting in a $290,000 estimated net settlement fund. The procedure for a class member to challenge his or her work history information is provided. Class members will be given 60 days to submit a request for exclusion from the class or an objection.

These notice procedures are adequate. The notice itself generally complies with the requirements for class notice. It provides basic information about the settlement, including the settlement amount and plan of allocation. It also explains what claims will be released by the settlement and the compensation that will be requested by plaintiffs’ counsel. It instructs potential class members how to dispute their work history information and how to opt out of the class.

However, the class notice must be modified to state that class members may appear and object at the final fairness hearing without filing or mailing any written objection with the Court or to counsel.

V. Conclusion and Order

The hearing on plaintiff’s motion is continued to July 8, 2016 at 9am. No later than 10 court days before that date, plaintiff shall file and serve supplemental papers addressing the reasons why individuals other than Admissions Consultants are included in the proposed class, how individuals employed “in a position that primarily performed the duties of an Admissions Consultant” will be identified, and whether such individuals are appropriately included in the class in light of the community of interest factors. Plaintiff’s supplemental brief shall not exceed 10 pages.