Case Name: Jose Soto v. Environmental Systems Inc., et al.
Case No.: 19-CV-346846

This is a putative class action on behalf of employees of defendant Environmental Systems Inc., alleging wage statement violations. Plaintiff Jose Soto also brings individual claims for harassment, discrimination, and related causes of action. Before the Court is plaintiff’s motion for preliminary approval of a settlement, which is unopposed.

I. Factual and Procedural Background

As alleged in the operative complaint, defendant provides mechanical engineering services in Santa Clara County. (Complaint, ¶ 8.) Plaintiff began his employment with defendant on January 16, 2017. (Id. at ¶ 7.) He alleges that he and other employees received wage statements that failed to list the pay period start date and the correct name of their employer. (Id. at ¶ 22.) Plaintiff also alleges that he experienced race-based discrimination and harassment during his employment with defendant, and was terminated on March 8, 2019 because of his race and national origin. (Id. at ¶¶ 29-31.)

Based on these allegations, plaintiff asserts (1) an individual and putative class claim for violation of Labor Code section 226(a), along with individual claims for (2) racial discrimination in violation of the Fair Employment and Housing Act (“FEHA”), (3) racial harassment in violation of FEHA, (4) failure to prevent discrimination and harassment in violation of FEHA, (5) wrongful termination in violation of public policy, and (6) intentional infliction of emotional distress.

The parties have reached a settlement of the putative class claim. 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 Standards 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, disapproved of on other grounds by Hernandez v. Restoration Hardware, Inc. (2018) 4 Cal.5th 260.)

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.)

In general, the most important factor is the strength of plaintiffs’ case on the merits, balanced against the amount offered in settlement. (See Kullar v. Foot Locker Retail, Inc. (2008) 168 Cal.App.4th 116, 130.) Still, 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., supra, 168 Cal.App.4th at p. 130.)

III. Settlement Process

According to a declaration by plaintiff’s counsel, the parties engaged in informal settlement discussions from the inception of this case. Defendant produced the applicable collective bargaining agreement and memorandum of understanding, plaintiff’s wage statements, and class data showing that 134 employees received a total of 4,790 allegedly noncompliant wage statements. Plaintiff’s counsel calculated defendant’s potential exposure on the wage statement claim to be $417,950, and the parties reached the settlement before the Court through arms’-length negotiations. Counsel states that defendant cured its wage statements under the cure provision of the Private Attorneys General Act (“PAGA”); accordingly, the complaint does not include a claim under PAGA.

IV. Provisions of the Settlement

The non-reversionary gross settlement amount is $200,000. Attorney fees of up to $66,666.67 (one-third of the gross settlement), litigation costs not to exceed $10,000, and administration costs of approximately $10,000 will be paid from the gross settlement. The named plaintiff will also seek an enhancement award of $10,000.

The net settlement of approximately $103,333.33 will be distributed to individual class members pro rata based on their wage statements issued during the class period. By the Court’s calculation, the average settlement payment will be approximately $771.14. Class members will not be required to submit a claim to receive their payments. Settlement awards will be allocated 100 percent to penalties. Funds associated with checks uncashed after 180 days will be distributed to Legal Aid at Work.

Class members who do not opt out of the settlement will release “any [and] all causes of action that were alleged or reasonably could have been alleged in the operative complaint based on Defendant’s alleged failure to identify the pay period start and/or end dates and the correct name and/or address of the legal entity that is the employer on its wage statements, including but not limited to all of the claims for failure to provide accurate wage statements pursuant to California Labor Code section 226(a) alleged in the Complaint.”

V. Fairness of the Settlement

Plaintiff submits that the settlement, which represents nearly half the maximum value of the wage statement claim, is fair and reasonable to the class, and the Court agrees. The parties have agreed to eliminate the distribution to the Labor and Workforce Development Agency that was originally included in their settlement given that the complaint does not include a claim under PAGA. In addition, plaintiff represents that he is still litigating his individual claims, and will lodge any individual settlement agreement for the Court’s review if a settlement is achieved.

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 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 current and former employees of Defendant in the State of California, who received a wage statement at any time from April 24, 2018, through March 20, 2019, 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 134 class members have already been identified based on defendant’s records, and the class is clearly defined. However, plaintiff’s memorandum of points and authorities defines the class as those employees who received a wage statement through March 20, 2019, while the proposed order he submitted to the Court defines the class as those employees who received a wage statement through December 13, 2019, the date of the preliminary approval hearing. In a supplemental declaration filed at the Court’s direction, plaintiff’s counsel confirms that the March 20th date is the correct one. The Court thus 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 statement 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 as an hourly employee and alleges that he experienced the wage statement violations at issue. 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 134 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 to both the litigants and the Court in this case.

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, along with each class member’s estimated payment. Class members are informed of their qualifying workweeks as reflected in defendant’s records and instructed how to dispute this information. Class members are given 45 days to request exclusion from the class, dispute their wage statement information, or submit a written objection. The notice instructs class members that they may appear at the final fairness hearing and make an oral objection even if they do not submit a written objection. The form of notice is adequate and is approved.

Turning to the notice procedure, the parties have selected Phoenix Settlement Administrators as the settlement administrator. The administrator will mail the notice packet within 25 calendar days of preliminary approval, after updating addresses using the National Change of Address Database. Any notice packets returned as undeliverable will be re-mailed to any forwarding address provided or located through skip tracing. Class members who receive a re-mailed notice packet shall have an additional 15 days to respond to the notice. These notice procedures are appropriate and are approved.

VIII. Conclusion and Order

Plaintiff’s motion for preliminary approval is GRANTED. The final approval hearing shall take place on April 17, 2020 at 9:00 a.m. in Dept. 1.

The following class is provisionally certified for settlement purposes:

all current and former employees of Defendant in the State of California, who received a wage statement at any time from April 24, 2018, through March 20, 2019, except those who opt out from participating in the settlement.

The Court will prepare the order.

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