Plaintiff Eric Paton (“Plaintiff”) brings this class action on behalf of himself and all persons formerly employed by defendant Advanced Micro Devices, Inc.’s (“AMD”) California locations who, on or after April 27, 2003, forfeited partially or fully accrued and unused vacation time in the form of a paid sabbatical upon termination of employment. According to the Complaint, AMD has a uniform written sabbatical policy that provides, in pertinent part, that “all regular salaried (exempt) employees who work at least 80 hours per pay period are eligible for an eight-week sabbatical at regular pay after every seven years of credited service. Employees normally working at least 40 hours a pay period are eligible for a prorated sabbatical.” AMD’s uniform sabbatical policy also provides, “employees who terminate and have not taken their sabbatical forfeit their eligibility.”

Plaintiff was an employee of AMD from June 6, 1997 until July 22, 2005 at AMD’s Sunnyvale, California location. For the majority of his employment he held the title of Senior Process Development Engineer. Plaintiff became eligible for an eight-week sabbatical on June 9, 2004, but it was delayed by AMD for “business reasons.” Plaintiff’s employment relationship with AMD ended prior to the start of the sabbatical and Plaintiff was not compensated for the sabbatical. Based on AMD’s uniform policies, Plaintiff believes that AMD, in each instance, refuses to compensate its employees for their fully or partially earned and unused vacation time in the form of sabbatical when an employee’s employment relationship with AMD ends prior to taking the sabbatical.

The Complaint, filed on April 27, 2007, sets forth the following causes of action: (1) Nonpayment of Wages (Violation of California Labor Code section 227.3); (2) Waiting Time Penalties (Violation of California Labor Code sections 202-203); (3) Unlawful Business Acts and Practices (Violation of California Business and Professions Code section 17200, et seq.); (4) Unfair Business Acts and Practices (Violation of California Business and Professions Code section 17200, et seq.); (5) Breach of Contract; (6) Unjust Enrichment; and (7) Declaratory and Injunctive Relief (California Code of Civil Procedure Sections 526 and 1060 and Civil Code section 3422).

On or about September 3, 2008, the Court certified the following class: “All salaried employees of Advanced Micro Devices, Inc. who (a) worked for AMD’s California locations while residing in California; (b) terminated on or after April 27, 2003; (c) did not sign a release; and (d) were not paid for a sabbatical benefit.” On November 12 and 25, 2008, the Court issued orders regarding notice to the class.

On May 8, 2009, AMD moved for summary judgment, or alternatively summary adjudication of all class claims and Plaintiff’s individual claims. On June 9, 2009, the Court denied the motion for summary judgment, but granted the motion for summary adjudication against the class claims on all causes of action and all of Plaintiff’s causes of action except for the fifth cause of action for breach of contract. Plaintiff appealed, and on August 5, 2011, the Court of Appeal reversed the grant of summary adjudication, holding that the record did not resolve, as a matter of law, whether the eight-week leave was intended as a sabbatical with a specific purpose or whether it was intended as additional vacation for longer term employees. (See Paton v. AMD (2011) 197 Cal.App.4th 1505, 1523-1525.)

On July 19, 2013, the Court granted Plaintiff’s motion to expand the class definition, extending the class period cutoff date from December 8, 2008 to September 1, 2013 and adding two subclasses.

Discussion

Plaintiff now moves for preliminary approval of class action settlement. AMD does not oppose the motion.

Under the terms of the proposed settlement, AMD will pay $5.2 million (the “Maximum Settlement Amount”), which includes $1,733,333 in attorney’s fees, $88,550 in litigation costs, a $10,000 class representative payment, and $20,000 in claims administration expenses. The remaining $3,348,117 (“Net Settlement Proceeds”) will be distributed among Class Members who submit a timely, valid Claim Form based on information provided by AMD to the Settlement Administrator regarding unpaid sabbatical benefits for each claiming Class Member.

The terms of the settlement are set forth in the Stipulation of Settlement and Release (“Stipulation of Settlement”). Exhibit 1 to the Stipulation of Settlement is a sample Claim Form; Exhibit 2 is a sample of the Class Notice; Exhibit 3 is a sample reminder postcard; Exhibit 4 is the “Plan of Allocation” of settlement proceeds; Exhibit 5 is a “Remainder Schedule.” The Plan of Allocation has five steps: (1) determine individual claim amount by multiplying the final daily rate of pay by the number of earned but unused sabbatical days (the “Individual Claim Amount”); (2) adjust individual claim amounts for subclass members by multiplying their Individual Claim Amounts by 66 2/3% (the “Adjusted Subclass Member Individual Claim Amount”); (3) add all Individual Claim Amounts and Adjusted Subclass Member Individual Claim Amounts together (the “Total Claim Amount”); (4) divide each AMD Class Member’s Individual Claim Amount and Adjusted Subclass Member Individual Claim Amount by the Total Claim Amount to determine each Class Member’s “Percentage Share”; and (5) multiply each Class Member’s Percentage Share by the Net Settlement Proceeds to determine each “Estimated Individual Settlement Payment.”

To determine any remainder to AMD based on the Remainder Schedule, the Settlement Administrator will determine the “Claimant Claim Rate” (total Estimated Individual Settlement Payments claimed by Claimants divided by Net Settlement Proceeds) and apply the Claimant Claim Rate to the Remainder Schedule to determine the Remainder that will be subtracted from the Net Settlement Proceeds. According to Plaintiff, if the total of the Estimated Individual Settlement Payments is less than 50% of the Net Settlement Proceeds, a portion of the Remainder will be divided among and added to the Individual Settlement Payments, and the balance of the Remainder will be retained by AMD.

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 in February and October of 2013. The case has been vigorously litigated over the course of many years, with significant discovery, law and motion practice, and appellate work. Regarding counsels’ experience, Plaintiff’s counsel submits that they are involved in numerous class action and complex cases.

“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.)

Although the amount offered in settlement is quite substantial, it is somewhat indeterminate given that AMD could retain much of it depending on how much the total Estimated Individual Settlement Payments end up being. Furthermore, there is no real discussion in the moving papers regarding the strength of Plaintiff’s claims. Plaintiff merely concludes that the litigation has reached a stage where the parties have a clear view of the strengths and weaknesses of their cases, but Kullar requires some development of a factual record of the strength of Plaintiff’s case in order for the Court to properly balance the amount offered in settlement against it.

The proposed attorney’s fee award of $1,733,333 represents 33 1/3% of the Maximum Settlement Amount, which is not an uncommon contingency fee percentage. Furthermore, the case has been actively litigated for many years here and on appeal, justifying a considerable fee award to Plaintiff’s counsel. Thus, the Court preliminarily approves the proposed fee award, but Plaintiff’s counsel should provide adequate billing records in support of a lodestar cross-check prior to final approval. (See Lealao v. Beneficial Cal. Inc. (2000) 82 Cal.App.4th 19, 46-47.)

Regarding class notice, the Stipulation of Settlement states that the parties agree to use Rust Consulting, Inc. (“Rust”) as Settlement Administrator. In accordance with Stipulation of Settlement, within 10 days of preliminary approval, AMD will provide Rust with identifying information regarding the Class Members, and within 10 days of receiving this information, Rust will check the addresses provided by AMD through the National Change of Address System and send the Notice and Claim Form via first class mail to all Class Members. The “Claims Deadline” for Class Members to submit a Claim Form is 60 days from the date of mailing. Likewise, the “Objection/Exclusion Deadline” for Class Members to object or request exclusion from the Class is also 60 days from the date of mailing. Rust will mail a Reminder Postcard 21 days prior to the Claims Deadline. If a Notice Packet is returned as undeliverable with a forwarding address, Rust will re-mail it with a letter stating that the recipient has until the original deadline or 15 days after re-mailing (whichever is later) to submit a Claim Form. If a Notice Packet is returned without a forwarding address, Rust will make reasonable efforts to locate forwarding addresses, including a skip trace.

The Court finds that first class mailing based on AMD’s employment records is reasonably calculated to give due notice to the Class. The proposed $20,000 in claims administration fees is facially reasonable, but must be supported by evidence in advance of the final approval hearing.

“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 proposed Class Notice, Exhibit 2 to the Stipulation and Settlement, mostly complies with California Rules of Court, rule 3.766(d) by providing a brief explanation of the case, the contentions of the parties, discussions regarding exclusion, and the binding effect of judgment. However, the Notice does not mention the right of Class Members not requesting exclusion to enter an appearance through counsel.

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.)

In support of the $10,000 class representative payment, Plaintiff’s counsel states that Plaintiff “has made himself available on numerous occasions to discuss his understanding as to the leave of absence benefits provided by AMD during his employment there, to correspond with Class Counsel regarding the status and strategy of the case as well as prepare for and appear for an all-day deposition. Mr. Paton was also kept apprised of the settlement discussions, and reviewed and approved the Stipulation of Settlement.” Plaintiff should provide more detailed evidence regarding the amount of time and energy he expended in pursuit of the lawsuit in order for the Court to determine whether the $10,000 class representative payment is reasonably proportionate.

For all of these reasons, the motion for preliminary approval is CONTINUED to May 16, 2014 at 9 a.m. Within 20 days of this Order, Plaintiff shall: (1) provide supplemental briefing on the strength of Plaintiff’s claims; (2) modify the Notice to include the right of Class Members not opting-out to enter an appearance through counsel; and (3) provide supplemental evidence regarding the amount of time and energy Plaintiff expended in pursuit of the lawsuit in support of the class representative payment.