Case Name: Denise Clamens-Hollenback v. Atterro, Inc., et al.
Case No.: 17CV305535

The tentative ruling below was issued to the parties on January 29, 2018:

This is a putative wage and hour class action by employees of defendant Atterro, Inc. Before the Court is plaintiff’s unopposed motion for preliminary approval of a class settlement.

I. Factual and Procedural Background

Plaintiff worked for Atterro, a Minnesota corporation, as an hourly employee in California from January 2016 to December 9, 2016. (First Amended Complaint (“FAC”), ¶ 15.) She alleges that Atterro failed to timely pay its California employees for their accrued paid time off (“PTO”) upon separation, belatedly issued final paychecks, and provided wage statements that did not state the correct entity address. (Id. at ¶¶ 1, 12, 19.) She alleges that defendant credited employees for less PTO than is required by law and did not allow employees to use their PTO as required under the Healthy Workplace, Healthy Families Act of 2014. (Id. at ¶¶ 16-17.) In addition, defendant withheld accrued PTO upon separation until employees returned their company-issued laptops, cellphones, and other property. (Id. at ¶ 18.)

Plaintiff filed this action on January 18, 2017. The operative FAC asserts claims for: (1) violation of Labor Code section 227.3 by failing to pay out PTO upon termination; (2) waiting time penalties under Labor Code sections 201-203; (3) violation of Labor Code section 226, subdivision (a) by failing to provide accurate itemized wage statements; (4) unfair competition; and (5) penalties under 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. 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, defendant informally produced documents showing the size of the class, the number of workweeks in the class period, class members’ PTO accruals logs and final pay documentation, as well as relevant policies, paystubs, and other documents. Plaintiff’s counsel reviewed these materials to determine the maximum potential damages in this action: $777,979.50, including PAGA penalties. Applying an 82 percent reduction to the maximum PAGA penalties, which plaintiff’s counsel views as particularly likely given the nature of the claims here, counsel estimates that a more likely recovery would be $581,863.

Following a full-day mediation on November 8, 2017, the parties reached a settlement of $150,000, or 26 percent of the estimated likely recovery.

IV. Provisions of the Settlement

The non-reversionary settlement includes a $1,875 payment to the California Labor and Workforce Development Agency associated with plaintiff’s PAGA claim (seventy-five percent of the $2,500 allocated to PAGA penalties). Attorney fees of up to $50,000 (one-third of the gross settlement), litigation costs estimated at $5,000, and administration costs estimated at $5,500 and capped at $10,000 will also be paid from the gross settlement, along with defendant’s share of payroll taxes. The named plaintiff will seek an enhancement award of $7,500.

The remaining net settlement will be distributed to class members pro rata based on the number of weeks worked by each class member during the class period. Class members will not be required to submit a claim to receive their payments. Checks uncashed after 120 days will be voided and the associated funds will be split between the Voluntary Legal Services Program, Employment Law Clinic and the Koinonia Family Services. Plaintiff estimates that the average settlement payment will be $977.13.

Class members who do not opt out of the settlement will release any and all claims “arising out of or related to the allegations made in the Complaint and First Amended Complaint,” including but not limited to specified claims under the Labor Code and related authorities.

V. Fairness of the Settlement

According to plaintiff, the disputed issues in this action include whether employees accrued PTO in accordance with the Healthy Workplace Healthy Family Act, whether employees were timely paid their accrued PTO upon separation, and whether any alleged violations were willful as required to impose waiting time penalties. Defendant contends that the PTO plan and accrual rates used complied with the grandfather clause of Labor Code section 246, subdivision (f), and a finding of zero liability on associated claims is therefore appropriate. With regard to PAGA penalties, plaintiff’s counsel believes that any penalty award would be on the low end because the alleged violations are either derivative of plaintiff’s damages claims or else are of a technical nature.

Counsel believes that the settlement is fair and reasonable to the class, and, based on the analysis above, the Court is inclined to agree. However, considering that many of the claims at issue relate to former employees only, the Court requires further information to assess whether it may be necessary to create appropriate sub-classes and apportion the settlement between current and former employees based on the relative values of their claims. Plaintiff shall provide a supplemental declaration addressing this issue before preliminary approval.

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 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 persons who are employed or have been employed by Defendant in California as hourly employees from January 18, 2013 through the date of entry of the Order of Preliminary Approval by the Court, excluding any person who previously settled or released the claims covered by this Settlement, any person who previously was paid or received awards through civil or administrative actions for the claims covered by this Settlement, or any person who submits a timely and valid Request for Exclusion as provided in this Settlement.

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 82 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. However, as discussed above, it may be necessary to create a sub-class of former employees in order to fairly distribute the settlement proceeds among class members.

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 and alleges that she did not receive required PTO and was not timely paid wages upon termination. 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 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.

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, and each class member’s estimated payment and eligible workweeks will be printed on a Disbursement Form enclosed with the notice. Class members are told how to dispute their workweeks and are granted 30 days to request exclusion from the class or submit a written objection.

The notice is generally adequate, but must be modified to indicate in section II(A) that defendant’s share of payroll taxes will also be deducted from the gross settlement. The notice must also be modified to state that class members may appear at the final fairness hearing to make an oral objection without submitting a written objection. In addition, the Disbursement Form must be reformatted to highlight the estimates of class members’ eligible workweeks and settlement payments by displaying this information in bold within a box set off from the rest of the text on the form.

Turning to the notice procedure, the parties have selected Simpluris, Inc. as the settlement administrator. The administrator will mail the notice packet within 30 days of preliminary approval, after using the National Change of Address Database to locate updated addresses for class members. Any notice packets returned as undeliverable will be re-mailed promptly to any forwarding address provided or new address located through skip tracing. These notice procedures are appropriate and are approved.

VII. Conclusion and Order

Plaintiff shall file a supplemental declaration addressing the relative values of current and former employees’ claims and the propriety of creating appropriate sub-classes and apportioning the claims accordingly between these groups. The supplemental declaration shall attach an updated class notice and Disbursement Form as described above and shall be filed prior to the preliminary approval hearing if possible.

In the event that plaintiff’s motion for preliminary approval is granted subject to the modifications and conditions above, the final approval hearing shall take place on May 25, 2018 at 9:00 a.m. in Dept. 1.

The Court will prepare the order.

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The updated tentative ruling below was issued to the parties on January 31, 2018:

This is a putative wage and hour class action by employees of defendant Atterro, Inc. Before the Court is plaintiff’s unopposed motion for preliminary approval of a class settlement.

In a prior tentative ruling, the Court directed plaintiff to file a supplemental declaration addressing the relative values of current and former employees’ claims and the propriety of creating appropriate sub-classes and apportioning the claims accordingly between these groups, and to make certain modifications to the proposed class notice and Disbursement Form. The Court has received and reviewed plaintiff’s supplemental filing, and it satisfies the Court’s concerns with the allocation of the settlement and the notice documents.

The Court will accordingly grant plaintiff’s motion for preliminary approval of the settlement as originally presented, for the reasons stated in its prior tentative and in the supplemental declaration.

The Court will prepare the order.