Case Name: Shannon Sanchez, et al. v. ExamOne World Wide, Inc., et al.

Case No.: 17CV308382

This is a putative class and Private Attorneys General Act (“PAGA”) action on behalf of medical examiners for defendants ExamOne World Wide, Inc. and Quest Diagnostics Incorporated, alleging a number of wage and hour violations. Before the Court is plaintiffs’ motion for preliminary approval of a settlement, which is unopposed.

I. Factual and Procedural Background

As alleged in the operative complaint, defendants hired plaintiff Shannon Sanchez as an “Examiner” to conduct medical exams for insurance applications on October 18, 2016. (Second Amended Class Action Complaint (“SAC”), ¶ 7.) She was compensated on a piece-rate basis, and was terminated on January 27, 2017. (Id. at ¶¶ 7-8.) Plaintiff Richa Ahuja has worked for defendants as an Examiner since March of 2016 and is also paid on a piece-rate basis. (Id. at ¶ 8.) Plaintiffs allege that defendants intentionally failed to pay Examiners minimum and/or overtime wages for hours spent completing non-piece-rate tasks; failed to provide Examiners with duty-free meal periods and paid rest breaks; failed to provide compliant wage statements; failed to reimburse Examiners’ business expenses related to use of their personal vehicles; and, as a result of these other violations, failed to timely pay Examiners wages owed upon separation of employment. (Id. at ¶¶ 3, 24.)

Based on these allegations, plaintiffs bring claims for (1) violation of Labor Code sections 226.2, 510, 1194, 1197, and 1197.1 by failing to pay employees for all regular hours worked; (2) violation of Labor Code sections 226.7 and 512 due to meal period violations; (3) violation of Labor Code sections 226.2 and 226.7 due to rest period violations; (4) violation of Labor Code sections 226(a) and 226.2 by failing to provide compliant wage statements; (5) violation of Labor Code section 2802 by failing to reimburse business expenses; (6) derivative violations of the Unfair Competition Law; and (7) penalties pursuant to the Private Attorneys General Act (“PAGA”).

Plaintiff Ahuja originally filed suit against defendants in Alameda on April 3, 2017, alleging a claim under PAGA. (Ahuja v. ExamOne World Wide, Inc. (Super. Ct. Alameda County, No. RG17855141).) Plaintiff Sanchez filed suit in this Court on May 1, 2017, and Ahuja was transferred here by stipulation of the parties and consolidated with the above-entitled action. On December 12, 2018, plaintiffs filed the SAC, consolidating the allegations of their individual complaints.

Meanwhile, a related case, Munila v. Quest Diagnostics Incorporated (Super. Ct. Alameda County, 2017, No. RG16808899), proceeded in Alameda County. A class action settlement was finally approved in Munila on September 19, 2017, and the parties herein met and conferred regarding early settlement of this action considering the impact of Munila.

The parties have now reached a settlement. Plaintiffs move 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/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

According to a declaration by plaintiffs’ counsel, following final approval of the settlement in Munila, the parties began settlement negotiations and agreed to stay discovery and exchange records and informally. Defendants provided employment data related to potential class members, including the total number of current and former employees, the number of pay periods and hourly rates at issue, and other pertinent information such as defendants’ policies regarding meal and rest periods, travel time, and reimbursement for work-related expenses. Plaintiffs’ counsel also analyzed plaintiffs’ payroll records and time-card data in preparation for settlement discussions.

The parties were able to reach agreement on the principal amount of a settlement in April of 2019. They continued to negotiate key terms of the agreement before the Court until December of 2019.

IV. Provisions of the Settlement

The non-reversionary gross settlement amount is $575,000. Attorney fees of up to $191,666.67 (one-third of the gross settlement), litigation costs not to exceed $10,000, and administration costs of approximately $8,500 (and not to exceed $10,000) will be paid from the gross settlement. $20,000 will be allocated to PAGA penalties, 75 percent of which will be paid to the LWDA. The named plaintiffs will also seek enhancement awards of $10,000 each.

The net settlement of approximately $329,833.33 will be distributed to individual class members pro rata based on their gross wages received during the class period. The average settlement payment will be approximately $749.62 to each of the 440 class members, and class members will not be required to submit a claim to receive their payments. Settlement awards will be allocated 1/3 to wages and 2/3 to interest and penalties, and defendants will pay the employer-side payroll taxes in addition to funding the gross settlement. The settlement provides that funds associated with checks uncashed after 180 days will revert to the “State of California Unclaimed Fund” in the name of the class member.

Class members who do not opt out of the settlement will release all claims, causes of action, etc. “stated in the Action or which could have been asserted based on the facts and allegations asserted in the Action,” including specified wage and hour claims, “or based on, arising from, or related to any claim, cause of action, or allegation that during the Class Period Mobile Examiners were not properly reimbursed for their expenses, did not receive compliant wage statements, did not receive their wages timely, were not provided or paid for meal and/or rest periods, were not paid overtime or minimum wage[s], or were not properly classified as independent contractors”; “claims, facts, and allegations that were pled or could have been pled in the Action and Second Amended Complaint …”; or “any other related or derivative claims in law or equity based on the subject matter hereof” during the class period. Claims and causes of action “unrelated to alleged wage-and-hour violations, including but not limited to claims for alleged unlawful discrimination or harassment, and claims which may not be released, compromised, or waived by law” are expressly excluded from the release.

V. Fairness of the Settlement

As an initial matter, counsel in other actions have informed the Court that the California State Controller’s Office is no longer accepting funds associated with wage and hour settlements for deposit as unclaimed property. Unless the parties have a different understanding, they shall meet and confer regarding the appropriate disposition of unclaimed funds in this matter pursuant to Code of Civil Procedure section 384 and shall select a recipient of such funds prior to final approval.

With regard to the value of the settlement, plaintiffs estimated that the maximum potential value of the case was $1.4 million for the minimum wage and overtime claims, $1.616 million for the meal and rest period claims, $1.54 million for the claims arising from failure to reimburse expenses, $614,000 for the wage statement claims, and $540,000 in waiting time penalties, for a total potential value of $5.7 million. However, in response to the Munila action, defendants changed their employment practices to comply with the Labor Code in October of 2017, reducing the applicable liability period from thirty months to seven months. In light of these changes, plaintiffs reduced their estimate of the case’s potential value to $1,287,060.

Moreover, defendants assert that nearly all members of the settlement class, including the named plaintiffs, signed valid and enforceable arbitration agreements with class action waivers, so that only PAGA civil penalties could be recovered on a class-wide basis. They also dispute the merits of plaintiffs’ claims, contending that they permissibly structured flat-fee payments to Examiners to include business expenses, case law does not support plaintiffs’ derivative wage statement claim, and any violations were not willful so as to entitle plaintiffs to waiting time penalties.

Considering the changes to defendants’ employment practices that were implemented, the gross settlement represents approximately 45 percent of the maximum exposure in the case. This is a good result for the class, particularly considering the presence of arbitration agreements that may limit classwide recovery. This result is consistent with the outcome in Munila, which plaintiffs note involved the same claims as this case (asserted as to an earlier class period) and was settled for a similar amount considering the length of the applicable class period. Finally, the Court finds that the PAGA allocation provided by the settlement is genuine and meaningful. The Court will consequently grant preliminary approval.

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

Plaintiffs requests that the following settlement class be provisionally certified:

All current and former full-time and part-time persons employed by Defendants as Mobile Examiners in California, at any time from March 1, 2017 to September 30, 2019.

Excluded from the class is

any person who opts out of the Settlement, or any person who has a) separately settled or released the claims covered by this Settlement or claims against Defendants generally, b) was paid or received awards through civil or administrative actions for the claims covered by this Settlement, or c) has separately brought or is separately bringing on his or her own behalf … any former or pending lawsuit, arbitrations, or administrative claim (such as a Labor Commissioner claim) against Defendants asserting any of the claims covered by this 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 440 class members have already been identified based on defendants’ records. Thus, the class is numerous and ascertainable. However, the parties inconsistently define the class with reference to Examiners employed by “Defendants” in some documents and with reference to Examiners employed by “Quest Diagnostics Incorporated” or “as ExamOne Mobile Examiners” for Quest in others. The parties are directed to meet and confer regarding the appropriate class definition. They shall address this issue with the Court at the hearing on this matter and update the class notice to reflect the appropriate definition if necessary.

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. Plaintiffs’ claims all arise from defendants’ 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, plaintiffs were employed by defendants as Examiners and allege that they experienced the violations at issue. The anticipated defenses are not unique to plaintiffs, and there is no indication that plaintiffs’ 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.)

Plaintiffs have the same interest in maintaining this action as any class member would have. Further, they have hired experienced counsel. Plaintiffs have 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 440 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 gross wages during the class period as reflected in defendants’ records and are given 45 days to request exclusion from the class or submit any written objections. 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, and directs them how to dispute their gross pay information. The notice will be issued in English only. The form of notice is adequate and is approved.

Turning to the notice procedure, the parties have selected Atticus Administration, LLC as the settlement administrator. The administrator will mail the notice packet within 10 days of receiving class members’ information from defendants, after updating class members’ 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. These notice procedures are appropriate and are approved.

VIII. Conclusion and Order

Subject to the parties’ agreement on a single, appropriate definition of the settlement class, plaintiffs’ motion for preliminary approval is GRANTED. The final approval hearing shall take place on May 1, 2020 at 9:00 a.m. in Dept. 1.

The Court will prepare the order.