Case Name: Hernandez v. Harrell Hospitality Group California, Inc.
Case No.: 2014-1-CV-270276

This is a putative class action arising out of alleged Labor Code violations. Plaintiff Guillermo Hernandez (“Plaintiff”) alleges that Defendant Harrell Hospitality Group California (“Defendant”) failed to provide rest periods, failed to pay all overtime wages, failed to provide accurate wage statements, and failed to pay final wages on a timely basis immediately upon an employee being discharged or within 72 hours of the member quitting. (First Amended Complaint (“FAC”), ¶ 12.)

The FAC, filed on September 25, 2014, sets forth the following causes of action: [1] Violation of Labor Code Section 226.7(a) and the Applicable IWC Wage Order; [2] Violation of Labor Code Section 510 and the Applicable IWC Wage Order; [3] Violation of Labor Code Section 226(a) and the Applicable IWC Wage Order; [4] Violation of Labor Code Sections 201-203; [5] Violation of Business and Professions Code Section 17200 Et Seq.; and [6] Representative Action Under PAGA. Following mediation on September 17, 2015, the parties reached a settlement. Plaintiff now moves for preliminary approval of the class action settlement.

I. Plaintiff’s Motion for Preliminary Approval of Class Action Settlement

A. Legal Standard

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, citing Dunk, supra, 48 Cal.App.4th at p. 1801 and Officers for Justice v. Civil Service Com’n, etc. (9th Cir. 1982) 688 F.2d 615, 624.)

“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, supra, 48 Cal.App.4th at p. 1801 and Officers for Justice v. Civil Service Com’n, etc., supra, 688 F.2d at p. 625, 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, supra, 48 Cal.App.4th at p. 1802.)

B. Analysis

i. The Proposed Settlement

The case is being settled on behalf of a class defined as follows: “[A]ll current and former employees of Defendant who were employed as non-exempt employees at any of Defendant’s locations anywhere in California at any time during the Class Period.” (Stipulation for Class Action Settlement (“Stipulation”), ¶ 1.4.) There are approximately 580 class members.

Defendant agrees to pay a maximum settlement amount of $550,000. (Stipulation, ¶ 4.1) This amount is non-reversionary. (Ibid.) From the settlement amount, Defendant agrees not to oppose Plaintiff’s request for $183,333.33 in attorney’s fees, $16,000 in litigation costs, and an enhancement award of $5000 for the class representative. (Id. at ¶¶ 9.1-9.2.) The settlement amount will also be used to pay claims administration costs of up to $15,500. (Id. at ¶ 9.3.) A total of $6000 will be allocated to civil penalties for PAGA. (Id. at ¶ 4.3.) After these deductions, a net settlement amount of $324,166.67 will remain for distribution to class members.

Class members will not need to submit claim forms to receive payment. A participating class member only needs to submit a settlement allocation form if the class member disputes the number of pay periods or other information used to calculate their estimated shares of the PAGA payment and/or net settlement consideration pre-printed on the settlement allocation form. (Stipulation, ¶¶ 5.6-5.7.) Each class member’s share of the net settlement will be calculated as follows: (1) the claims administrator will determine the total number of pay periods worked by all participating class members during the class period; (2) the claims administrator will then divide the amount of the net settlement consideration by the total number of pay periods, which will produce an amount per pay period to be paid to each class member; (3) the amount per pay period will be multiplied by the number of pay periods worked by each class member during the class period, resulting in the amount to be paid to that class member. (Id. at ¶ 4.5.) Based on this formula, the average distribution will be approximately $558.55 ($13.13 x. 42.54 pay periods). (Declaration of Gregg A. Farley in Support of Motion for Preliminary Approval of Class Action Settlement, ¶ 29.)

In exchange for the above, class members agree to release their claims. (Stipulation, ¶¶ 10.1-10.3.) Class members who do not like the scope of the release or the settlement in general can opt out by submitting a timely request for exclusion form. (Id. at ¶ 5.6.)

Plaintiff contends the settlement is fair and follows both extensive discovery and arm’s-length negotiations. Plaintiff asserts that class counsel and a forensic accounting consultant calculated the potential liability of Defendant for the class period to be a total of $1,697,575, the majority of which was for wage statement penalties ($1,105,350) and waiting time penalties ($523,967). The gross settlement amount of $550,000 is close to one third of the calculated potential recovery. This is within the range of reasonable recoveries for a settlement. Moreover, settlement before trial removes any uncertainty and the possibility of loss, and also reduces the litigation expenses of the parties.

As stated above, Plaintiff will seek a class representative incentive payment of $5000. In support of the request, Plaintiff has provided a declaration specifying his involvement in this action. He states he spent in excess of 25 hours on the case. (Declaration of Plaintiff Guillermo Hernandez in Support of Motion for Preliminary Approval of Class Action Settlement, ¶ 6.) His time spent on the case included meetings and telephone calls with class counsel, providing documents and information requested by class counsel, responding to discovery requests, and reviewing and discussing the terms of the settlement. (Ibid.) The Court finds that Plaintiff has properly supported the request for an incentive award and that it is justified.

The Court also has an independent right and responsibility to review the requested attorney’s fees and only award so much as it determines reasonable. (See Garabedian v. Los Angeles Cellular Telephone Co. (2004) 118 Cal.App.4th 123, 127-128.) Plaintiff’s counsel will seek attorney’s fees of $183,333.33 (1/3 of the gross settlement amount. While 1/3 of the common fund for attorney’s fees is generally considered reasonable, Plaintiff’s counsel should provide billing records and lodestar information prior to the final approval hearing so the Court can compare that information to the requested fee amount.

ii. Provisional Certification of Class

Plaintiff requests that the putative class be certified for purposes of the settlement. 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: (1) an ascertainable class; and (2) a well-defined community of interest among the class members. (Sav-On Drug Stores, Inc. v. Superior Court (2004) 34 Cal.4th 319, 326.)

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. (Id. at p. 326.) “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 (1976) 18 Cal.3d 381, 385.)

As explained by the California Supreme Court,

The certification question is essentially a procedural one that does not ask whether an action is legally or factually meritorious. 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.

(Sav-On Drug Stores, Inc. v. Superior Court, supra, 34 Cal.4th at p. 326, internal quotation marks, ellipses, and citations omitted.)

Class members can be ascertained from Defendant’s personnel and payroll records. Common issues in this case relate to whether Defendant had uniform policies and procedures that resulted in Defendant failing to provide rest periods, pay all overtime wages, provide accurate wage statements, and pay final wages on a timely basis. No issue has been raised regarding the typicality or adequacy of Plaintiff as class representative. In sum, the Court finds that the proposed class should be conditionally certified.

iii. Class Notice

The content of a class notice is subject to court approval.

If the court has certified the action as a class action, notice of the final approval hearing must be given to the class members in the manner specified by the court. 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.

(Cal. Rules of Court, rule 3.769(f).)

The notice generally complies with the requirements for class notice. (See Stipulation, Exhibit A.) It provides basic information about the settlement, including the class definition and the settlement terms. It provides that class members do not need to file a claim to receive payment pursuant to the settlement.

On page five of the notice, however, it states that written objections must be mailed to the Claims Administrator if class members wish to object. The class notice must be modified to state that class members may appear and object at the final approval hearing without mailing or filing any written objection.

In sum, Plaintiff’s motion for preliminary approval of class action settlement is GRANTED subject to the modification to the class notice.