Case Name: Francisco Carrasco v. West Valley Engineering, Inc., et al.
Case No.: 17-CV-310816

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

I. Factual and Procedural Background

West Valley is a staffing company headquartered in Santa Clara County. (Complaint, ¶ 8.) It hired plaintiff to work for its client Tesla on September 28, 2016. (Id. at ¶ 7.) Plaintiff was terminated on March 2, 2017. (Ibid.) He alleges that during his employment, defendant failed to provide accurate itemized wage statements identifying all required information, including the employer’s name and address. (Id. at ¶¶ 22, 30, 34.) Plaintiff filed this action on May 23, 2017, alleging claims for (1) violation of Labor Code section 226 and (2) penalties under the Private Attorneys 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, plaintiff has conducted informal discovery including review of his own documents and of data regarding the size of the putative class and the number of wage statements at issue. He determined that the wage statement violation alleged was not company-wide, and agreed to limit the settlement class to only those individuals who received a wage statement that did not show the employer’s name and address. On December 19, 2017, the parties participated in mediation with Christopher E. Panette of Fenton & Keller, LLP. After further negotiations over the next three weeks, theey reached a settlement of $370,000 based on the mediator’s proposal. Defendant has now corrected the defect on its wage statements, and plaintiff seeks preliminary approval of the settlement.

IV. Provisions of the Settlement

The non-reversionary settlement includes a $3,750 payment to the California Labor and Workforce Development Agency associated with plaintiff’s PAGA claim (seventy-five percent of the $5,000 allocated to PAGA penalties). Attorney fees of up to $123,333.33 (approximately one-third of the gross settlement), litigation costs not to exceed $15,000, and administration of $12,500 will also be paid from the gross settlement. The named plaintiff will seek an enhancement award of $10,000. The parties agree that all payments to settlement class members shall be treated as penalties not subject to tax withholdings.

The net settlement, approximately $205,416.67, will be distributed to class members pro rata based on their qualifying wage statements issued during the class period. Class members will not be required to submit a claim to receive their payments. If a class member fails to cash his or her settlement check within 180 days of mailing, the check will be voided and the associated funds will be deposited with the Department of Industrial Relations Unclaimed Wages fund in the class member’s name. Plaintiff estimates that the average settlement payment will be $128.06, based on the 1,604 estimated class members.

The settlement will be funded in three payments of $123,333.33: one within thirty days of preliminary approval, one within ten days of the Effective Date of the settlement (the date of final approval, unless objections are pursued), and one within forty days of the Effective Date.

Class members who do not opt out of the settlement will release all claims, etc. “that are alleged in, or that could have been alleged in, Plaintiffs’ notice letter to the LWDA … or the Complaint …, arising out of wage statements furnished by Defendant to individuals that did not show the name and address of the employer.”

V. Fairness of the Settlement

Plaintiff estimates that the maximum total value of this case is $4.3 million. The settlement thus represents eight percent of the total exposure. Plaintiff believes this settlement is appropriate in light of the general risks of litigation and defendant’s tenuous financial condition, which is described by its Chief Financial Officer in a declaration filed with plaintiff’s motion. Considering the technical nature of the violations alleged and based on its review of the CFO’s declaration, the Court agrees that the settlement is fair and reasonable to the class.

The Court retains 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 shall submit lodestar information prior to the final approval hearing 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 individuals who worked for Defendant in California at any time from May 23, 2016, through the date of the Court’s preliminary approval of the class action settlement, and who were paid wages by Defendant for hours worked but did not receive a corresponding wage statement that showed the name and address of the employer, except those who opt out from participating in the 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 1,604 class members are easily identified based on defendant’s records. However, the class is defined to encompass employees who worked for defendant during the class period, but received noncompliant wage statements during an unspecified period of time. As defined, the class may include employees who received noncompliant wage statements outside of the class period. For clarity and consistency with the structure of the settlement, the Court will redefine the class as:

All individuals who worked for Defendant in California at any time from May 23, 2016, through the date of the Court’s preliminary approval of the class action settlement, and who were paid wages by Defendant for hours worked during that time period but did not receive a corresponding wage statement that showed the name and address of the employer, except those who opt out from participating in the settlement.

With this modification to the class definition, the Court finds that the class is numerous, ascertainable, and appropriately defined.

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 he did not receive accurate itemized wage statements. 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, he 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 1,604 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.

VII. 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 qualifying wage statements are indicated. Class members are granted 45 days to request exclusion from the class and may submit a written objection up to 14 days before the final approval hearing. The notice indicates that class members may appear at the final fairness hearing to make an oral objection without submitting a written objection.

The notice is generally adequate, but must be modified to highlight the estimates of class members’ eligible wage statements and settlement payments by displaying this information in bold within a box set off from the rest of the text on the first page of the notice. The notice must also be modified to explain how class members may dispute this information, and to incorporate the modification to the class definition adopted by the Court above.

Turning to the notice procedure, the administrator will mail the notice packet within 40 calendar days of preliminary approval, after updating class members’ addresses using the National Change of Address database. Any notice packets returned as undeliverable will be re-mailed to any updated addresses located through skip tracing.

These notice procedures are appropriate and are approved. Prior to final approval, but after the last date to opt out or object, plaintiff shall file a declaration by the administrator addressing the results of the notice process.

VIII. Conclusion and Order

Plaintiff’s motion for preliminary approval is GRANTED subject to the modifications to the class definition and notice described above. The final approval hearing shall take place on September 28, 2018 at 9:00 a.m. in Dept. 1.

The following class is provisionally certified for settlement purposes:

All individuals who worked for Defendant in California at any time from May 23, 2016, through the date of the Court’s preliminary approval of the class action settlement, and who were paid wages by Defendant for hours worked during that time period but did not receive a corresponding wage statement that showed the name and address of the employer, except those who opt out from participating in the settlement.

The Court will prepare the order.