Case Name: Silvia Hernandez v. Wells Fargo Bank, National Association, et al.
Case No.: 16-CV-299319

This is a wage and hour class action by employees of defendant Wells Fargo Bank, National Association. Before the Court is plaintiff’s motion for preliminary approval of a settlement, which is unopposed.

I. Factual and Procedural Background

Plaintiff alleges that she worked for Wells Fargo from 2008 to 2013 or 2014, and again from January 2015 to March 28, 2016. (Complaint, ¶ 8.) During her employment, her wage statements did not identify her accurate total hours worked when she was paid shift premium and shift premium overtime wages. (Ibid.) In addition, plaintiff earned non-discretionary incentive pay that was not factored into her regular rate of pay for purposes of calculating meal period premiums. (Ibid.)

On June 17, 2016, plaintiff filed this action in San Benito County on behalf of two putative classes corresponding to her two theories of liability described above. (Complaint, ¶ 15.) The complaint asserts claims for (1) meal premium violations under Labor Code sections 226.7 and 512, (2) wage statement violations under Labor Code section 226, (3) penalties under the Private Attorneys General Act (“PAGA”), and (4) unfair competition under Business & Professions Code section 17200 et seq.

The action was transferred to this Court on August 30, 2016. On June 18, 2018 the Court granted plaintiff’s motion to certify the following two classes:

(1) The “Shift Premium Class” of “all current and former non-exempt employees of Defendant in the State of California who were paid shift premium pay, including without limitation ‘Shift Premium’ and ‘Shift Premium OT,’ at any time from June 17, 2015, through the present.”

(2) The “Meal Break Premium Class” of “all current and former non-exempt employees of Defendant in the State of California who were paid any meal break premium payments during a time period covered by nondiscretionary incentive compensation, including without limitation ‘Shift Premium,’ ‘Shift Premium-OT’ and ‘RB Quarterly Bonus,’ at any time between June 17, 2012, through the present.”

The parties have reached a settlement. Plaintiff now moves for an order preliminarily approving the settlement, 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/PAGA 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.)

Finally, Labor Code section 2699, subdivision (l) provides that “[t]he superior court shall review and approve any penalties sought as part of a proposed settlement agreement pursuant to” PAGA. Seventy-five percent of any penalties recovered under PAGA go to the Labor and Workforce Development Agency (“LWDA”), leaving the remaining twenty-five percent for the aggrieved employees. (Iskanian v. CLS Transportation Los Angeles, LLC (2014) 59 Cal.4th 348, 380.) “[T]here is no requirement that the Court certify a PAGA claim for representative treatment” as in a class action. (Villalobos v. Calandri Sonrise Farm LP (C.D. Cal., July 22, 2015, No. CV122615PSGJEMX) 2015 WL 12732709, at *5.) “[W]hen a PAGA claim is settled, the relief provided … [should] be genuine and meaningful, consistent with the underlying purpose of the statute to benefit the public ….” (Id. at *13.) The settlement must be reasonable in light of the potential verdict value (see O’Connor v. Uber Technologies, Inc. (N.D. Cal. 2016) 201 F.Supp.3d 1110, 1135 [rejecting settlement of less than one percent of the potential verdict]); however, it may be substantially discounted given that courts often exercise their discretion to award PAGA penalties below the statutory maximum even where a claim succeeds at trial (see Viceral v. Mistras Group, Inc. (N.D. Cal., Oct. 11, 2016, No. 15-CV-02198-EMC) 2016 WL 5907869, at *8-9).

III. Settlement Process

After certification was granted, the parties participated in mediation with Jeffrey Ross on April 24, 2019. They agreed to postpone sending notice of certification to the class in the meantime. Defendant provided plaintiff with data including the number of class members in each class, the number of pay periods during which class members were paid meal period premiums and non-discretionary incentive pay, the number of wage statements reflecting shift differential pay, the number of former employees in the class, and compensation information. Plaintiff performed a comprehensive damage analysis based on this information, and the parties were able to reach a settlement.

IV. Provisions of the Settlement

The non-reversionary gross settlement amount is $5,750,000. Attorney fees of up to $1,916,667 (one-third of the gross settlement), litigation costs of up to $35,000, and administration costs of approximately $125,000 will be paid from the gross settlement. $40,000 will be allocated to PAGA penalties, 75 percent of which will be paid to the LWDA. The named plaintiff will also seek an enhancement award of up to $10,000.

The net settlement of approximately $3,633,333 will be distributed five percent to the Meal Period Regular Rate Sub-Class (which, as discussed below, generally corresponds to the “Meal Break Premium Class” certified by the Court) and ninety-five percent to the “Wage Statement Sub-Class” (which generally corresponds to the “Shift Premium Class”). These sums will then be divided among participating class members in each subclass based on their pro-rata share of eligible workweeks (for the Meal Period Regular Rate Sub-Class) or wage statements (for the Wage Statement Sub-Class). According to plaintiff, considering the $3,633,333 net settlement, the average payment to each class member will be $84.44.

Class members will not be required to submit a claim to receive their payments. Settlement awards will be allocated half to wages and half to interest and penalties for the Meal Period Regular Rate Sub-Class, and one hundred percent to interest and penalties for the Wage Statement Sub-Class. Defendants will pay their share of payroll taxes separately from the gross settlement. Funds associated with checks uncashed after 180 days will be tendered to Legal Aid at Work.

Class members who do not opt out of the settlement will release claims “related to, or in any way growing out of, any and all claims that were or could have been asserted in this Action that are based on or arise out of the facts alleged in any version of the complaints filed in this Action, from June 17, 2012, through the Preliminary Approval Date,” including specified meal period and wage statement claims and derivative PAGA claims. The release specifically excludes claims currently pending in Staublein v. Wells Fargo Bank, N.A. (Super. Ct. San Bernardino County, No. CIVDS 1712267).

V. Fairness of the Settlement

Plaintiff calculated the potential exposure for the wage statement claims to be $16,462,350 in penalties under Labor Code section 226 and the potential value of the underpaid meal period premiums to be $904,671. These estimates do not include potential waiting time and PAGA penalties, which could be substantially reduced in the Court’s discretion. The recoverability of derivative waiting time penalties is also uncertain as a matter of law. The settlement thus represents approximately 1/3 of the likely maximum value of the case. Plaintiff urges that the settlement is fair and reasonable to the class and the Court agrees with this assessment, particularly considering the uncertainty of recovering the maximum potential penalties. The allocation between the subclasses is fair and appropriate in light of the relative value of their claims. Finally, the Court finds that the PAGA allocation provided by the settlement is genuine, meaningful, and reasonable.

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 Classes

The Court has already certified two classes in this action, which generally correspond to the subclasses defined by the settlement agreement. The definitions set forth in the settlement agreement differ from those approved by the Court in that the class period is extended to include the period from the date the Court certified the class through May 30, 2019. The new definitions also reflect non-substantive changes in wording. The settlement class additionally excludes “any individual who has a pending complaint (other than the Action) or administrative complaint containing allegations that are also contained in the Complaint or who has retained counsel (other than Class Counsel, as defined below) to represent him/her in connection with any wage and hour claims against Wells Fargo and/or any individual who has previously signed an individual release that encompasses all claims contained in the Complaint.”

The Court retains discretion to modify the class definition following certification. (See Janik v. Rudy, Exelrod & Zieff (2004) 119 Cal.App.4th 930, 947-948; Cal. Rules of Court, rule 3.764(e) [parties may modify the class certification order by stipulation approved by the Court].) Here, the proposed changes are appropriate and are approved, with the exception of the exclusion of “any individual who has a pending complaint (other than the Action) or administrative complaint containing allegations that are also contained in the Complaint or who has retained counsel (other than Class Counsel, as defined below) to represent him/her in connection with any wage and hour claims against Wells Fargo.” The Court sees no reason to exclude such individuals—whose claims may be largely or completely unrelated to those at issue here—from the benefits of the settlement, and expects they will decide whether to opt out of the class in consultation with their counsel.

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. Class members are informed of their qualifying workweeks/wage statements 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 workweek/wage statement information, or submit a written objection.

The notice is generally adequate, but must be modified to inform 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 notice must also be modified to inform class members of their estimated settlement payments in a box on the first page of the notice, set off from the rest of the text. With these modifications, the notice is approved.

Turning to the notice procedure, the parties have selected Rust Consulting as the settlement administrator. The administrator will mail the notice packet within 45 days of preliminary approval, after updating addresses using the National Change of Address Database. The administrator will conduct skip tracing on any notices that are returned as non-deliverable, as needed, and will re-mail such notices. 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 January 24, 2020 at 9:00 a.m. in Dept. 1.

The following modified classes are provisionally certified for settlement purposes:

All current and former non-exempt employees of Wells Fargo Bank, N.A. in California who received at least one wage statement that included shift premium pay (including without limitation “Shift Premium 15%” and “Shift Premium-OT”) from June 17, 2015 to May 30, 2019 (“Wage Statement Sub-Class”).

All current and former non-exempt employees of Wells Fargo Bank, N.A. in California who received at least one meal period premium payment from June 17, 2012 to May 30, 2019 during a time period covered by nondiscretionary incentive compensation (including without limitation “Shift Premium-15%,” “Shift Premium-OT,” and “RB Quarterly Bonus”) (“Meal Period Regular Rate Sub-Class”).

Excluded from the classes are any individuals who have “previously signed an individual release that encompasses all claims contained in the Complaint.”

The Court will prepare the order.