Judge Bruce G. Iwasaki, Case 21STCV20904 2022-12-07 Tentative Ruling

Tentative Ruling: The Court preliminarily approves the settlement and sets a Final Approval Hearing date on a date to be determined at the hearing.

On June 4, 2021, Plaintiff Alexander Gnaedig filed the Complaint against Defendant Favorite Healthcare Staffing, Inc. (Favorite) under the Private Attorneys General Act (PAGA) for numerous Labor Code violations including failure to pay overtime wages, provide meal/rest periods, and failure to maintain accurate payroll records. On November 18, 2022, the parties stipulated to Plaintiff filing a First Amended Complaint to add in additional individual plaintiffs, Akimasia Walker, Amy Weston, and Janet Clifford.

The parties reached a settlement. Plaintiffs now moves for an order granting conditional certification of the Class, appointment of Plaintiffs as Class Representatives, approving the proposed Notice of Class Action Settlement and the corresponding opt-out and objection procedures, and preliminary approval of class settlement. The motion is unopposed.

Plaintiff’s counsel avers that he provided notice of the proposed settlement via online submission to the Labor Workforce Development Agency. (Genish Decl., ¶ 45.)

The parties settled this action through the “Class Action and PAGA Settlement Agreement and Class Notice” (Settlement Agreement.) (Genish Decl., Ex. B.) The Settlement Agreement requires Defendant to pay the total settlement amount of $3,650,000.00 (Gross Settlement Amount). Defendant is required to transmit the funds to the Settlement Administrator no later than 15 business days after the “Effective Date,” which is the date upon which the time for appeal of the Court’s order granting final approval of the Settlement and entry of judgment expires. The Settlement Administrator will disburse the amount without asking or requiring the Class Members to submit any claims. Checks will be valid for 180 calendar days; any checks that are not cashed will be transferred to the Controller of the State of California and held for the benefit of the Settlement Class Member and PAGA Group Member. (Id. at ¶ 18.)

The “Released Claims” for Settlement Class Members include “all claims for wages, statutory and civil penalties, damages and liquidated damages, premiums, interest, restitution, injunctive relief, fees and costs under federal and California law that were alleged in the operative Complaints and any Amended Complaints in the Actions, and/or any letters submitted by Plaintiffs to the LWDA against Favorite in the Actions, and/or claims which could have been alleged that reasonably relate to or which reasonably arise out of the same set of operative facts pled therein, whether such claims or forms of relief are known or unknown during the Class Period, including, but not limited to: California Labor Code §§ 200, 201, 201.3, 202, 203, 204, 210, 218.5, 218.6, 221, 222, 223, 225.5, 226, 226.3, 226.7, 246(i), 500, 510, 512, 554, 558, 1174, 1174.5, 1194, 1194.2, 1194.3, 1197, 1197.1, 1198, 1199, 2800, 2802 and all Applicable Wage Orders and California Code of Regulations, 29 U.S.C. §§ 207, 216(b), Business & Professions Code § 17200 et seq., California Civil Code § 3287(a), California Code of Civil Procedure § 1021.5, and all other statutory and regulatory violations alleged in the operative Complaints and any Amended Complaints in the Actions, and with respect to the statutory and civil penalties claimed in the Actions, any source of obligation as a basis for claiming such penalties during the Class Period, including any and all obligations released above which are imposed by the applicable Wage Orders. The release shall be given full res judicata and collateral estoppel effect upon entry of judgment. All Participating Class Members who cash their Individual Class Payment checks (that will include language to the effect that cashing the check will release their rights under the FLSA for any claims pled or that could have been pled based on the factual allegations pled in the Operative Complaint and any Amended Complaint in the Actions) will also be deemed to have opted in for purposes of the FLSA, and their Released Claims will include a release of the FLSA claims based on claims alleged, or that could have been alleged based on the factual allegations pled in the Operative Complaint and any Amended Complaint in the Actions. Except as set forth in paragraph 5.3 of this Agreement, Participating Class Members (except Plaintiffs) do not release any other claims, including claims for vested benefits, wrongful termination, violation of the Fair Employment and Housing Act, unemployment insurance, disability, social security, workers’ compensation, or claims based on facts occurring outside the Class Period.” (Genish Decl., Ex. B, ¶ 5.2.)

As to the PAGA claims, the release is for “all 12 claims for civil penalties under the Labor Code pursuant to PAGA that were alleged, or reasonably could have been alleged, based on the facts stated in the Operative Complaints, any Amended Complaints in the Actions, the PAGA Notices and ascertained in the course of the Actions. The PAGA Release shall be given full res judicata and collateral estoppel effect upon entry of the judgment in this Action so as to bar the LWDA and any other individual or entity from filing or pursuing the PAGA Released Claims against the Released Parties in any forum.” (Id. at ¶ 5.3.)

The Gross Settlement Amount will also include a $150,000.00 PAGA Payment. (Genish Decl., Ex. B, ¶ 3.2.5.) The Labor and Workforce Development Agency (LWDA) will receive 75%, or $112,500.00, as the PAGA penalty, while 25%, or $37,500.00, will be allocated to the PAGA Group Members. The Settlement Administrator will calculate the individual PAGA formula on a pro-rated basis dependent upon the aggregate number of PAGA Pay Periods worked by each member during the PAGA Period.

Plaintiffs additionally request payment of attorneys’ fees not to exceed 33% of the Gross Settlement Amount (approximately $1,216,666.67) and costs not to exceed $40,000.00. (Genish Decl., ¶ 40.) In addition, the Settlement Agreement contemplates an enhancement payment to the named Plaintiffs in the amount of $10,000.00.[1] (Id. at ¶ 39.)

The parties request that the Court designate ILYM Group, Inc. (ILYM) as the Settlement Administrator to administer the settlement. (Genish Decl., ¶ 43.) Up to $30,000.00 in Settlement Administrator costs are allowed under the Settlement Agreement. (Id. at ¶ 15.)

The amount of each Class Member’s claim is to be determined by calculating the value of each Workweek within the Class Period (Net Settlement Amount divided by total number of Workweeks worked by all Class Members) multiplied by each individual member’s number of workweeks. (Id. at Ex. B, ¶ 3.2.4.) Similarly, the PAGA individual payments are calculated by dividing $37,500.00 by the aggregate total number of PAGA Pay Periods and multiplying that with each Individual PAGA Group Member’s total number of PAGA Pay Periods worked during the PAGA Period. (Id. at ¶ 3.2.5.1.) As to tax treatment, 20% of each payment will be allocated to settlement of wage claims. These amounts are subject to tax withholding and will be reported an IRS W-2 Form. (Id. at ¶ 3.2.4.1.)

Plaintiffs seek conditional certification of a class of individuals who are or were hourly-paid and/or non-exempt employees of Defendant between January 1, 2021 and July 31, 2022.

Class certification is appropriate when “the question is one of a common or general interest, of many persons, or when parties are numerous, and it is impracticable to bring them all before the court.” (Code Civ. Proc., § 382.) “The party advocating class treatment must demonstrate the existence of an ascertainable and sufficiently numerous class, a well-defined community of interest, and substantial benefits from certification that render proceeding as a class superior to the alternatives.” (Brinker Restaurant Corp. v. Superior Court (2012) 53 Cal. 4th 1004, 1021.) Trial courts are afforded great discretion in granting or denying certification, and “ ‘[a]ny valid pertinent reason stated will be sufficient to uphold the order.’ ” (Linder v. Thrifty Oil Co. (2000) 23 Cal.4th 429, 435-36.)

A class is ascertainable “when it is defined ‘in terms of objective characteristics and common transactional facts’ that make ‘the ultimate identification of class members possible when that identification becomes necessary.’ [Citation.]” (Noel v. Thrifty Payless (2019) 7 Cal.5th 955, 980.)

Here, the evidence is sufficient to establish that the proposed class is ascertainable. The Class is defined as “ ‘all hourly-paid and/or non-exempt employees of Favorite referred to as “Temporary Healthcare Professionals” who performed work in the State of California and were paid for one or more pay periods during the Class Period.’ ” (Genish Decl., ¶ 14.) Plaintiffs contend that potential members’ identities may be determined from “Defendants’ payroll records” and the “class definition is sufficiently specific to enable the parties, potential Class Members and the Court to determine the parameters of the Class.” (Motion, p. 18:17-20; Cal. Code Regs., tit. 8 § 11050, subd. (7)(A).) This proposed class is sufficiently defined “in terms of objective characteristics and common transactional facts” to be identified, and the Court finds that the class is ascertainable.

California Courts have recognized that “[n]o set number is required as a matter of law for the maintenance of a class action.” (Rose v. City of Hayward (1981) 126 Cal.App.3d 926, 934 (Rose) [surveying cases and recognizing that classes of ten to forty-two individuals were sufficiently numerous for a class action], disapproved on unrelated grounds in Noel v. Thrifty Payless, Inc. (2019) 7 Cal.5th 955.)

The proposed settlement class is estimated to be 7,290 class members. (Genish Decl. ¶ 14.) The class is sufficiently numerous. (See Rose, supra, 126 Cal.App.3d at pp. 934-935.)

“ ‘The community of interest requirement involves three factors: “(1) predominant common 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.” ’ [Citation.] Regarding the first of these factors, [the Supreme Court has] recognized ‘ “[a]s a general rule” ’ that ‘ “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.” ’ [Citations.] Relatedly, ‘In certifying a class action, the court must also conclude that litigation of individual issues, including those arising from affirmative defenses, can be managed fairly and efficiently.’ [Citation.] Finally, other considerations relevant to certification ‘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.’ [Citation.]” (Noel, supra, 7 Cal.5th at pp. 968-970.)

Here, the evidence demonstrates that (1) the claims at issue pertain to a common wage and hour policy or practice applicable to all class members (including denial of meal and rest periods, requirements to perform work off-the-clock, and failure to compensate for all time actually worked), (2) such Plaintiffs’ claims and injuries arise from the same facts and theories as all other class members, and (3) such claims are adequately pursued by the Class Representatives, who were injured by the same conduct. (Motion, p. 19:5-18.)

Defendant did not file an opposition to Plaintiffs’ motion and does not challenge Plaintiff’s assertions regarding community of interest. Thus, the court accepts Plaintiff’s assertions and finds that a community of interest exists among the Class members.

Whether Substantial Benefits from Certification Exist that Render Proceeding as a Class Superior to the Alternatives

Plaintiff argues that class action is the superior method of adjudication because Class Members and the Court would derive “substantial benefits.” Otherwise, individual lawsuits “would unduly burden the courts and could result in inconsistent results.” (Motion, p. 20:8-15.)

As the Class Members allegedly were subject to and injured by a uniform application of the same policies and procedures, the Court agrees that proceeding as a class would be superior to the alternatives.

Therefore, the Court certifies the subject class for the purposes of settlement. (Cal. Rules of Court, rule 3.769(d).)

California Rules of Court, rule 3.769 sets forth the procedure to evaluate class actions that settle before class certification, which generally requires court approval. (Cal. Rules of Court, rule 3.769(a).) Either party to the settlement agreement may move for preliminary approval and must attach a proposed notice to class members and proposed order. (Cal. Rules of Court, rule 3.769(c).) Prior to final approval of the settlement, “the court must conduct an inquiry into the fairness of the proposed settlement.” (Cal. Rules of Court, rule 3.769(g).)

In reviewing the terms of a settlement agreement, the court determines whether the settlement is fair, reasonable, and adequate to all concerned, and not the product of fraud, collusion, or overreaching. (Reed v. United Teachers Los Angeles (2012) 208 Cal.App.4th 322, 337; Nordstrom Commission Cases (2010) 186 Cal.App.4th 576, 581.) In the context of a class action settlement, the court considers various factors including whether (1) the settlement is the result of 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. (Nordstrom, at p. 581; Wershba v. Apple Computer, Inc. (2001) 91 Cal.App.4th 224, 245; see also Dunk v. Ford Motor Co. (1996) 48 Cal.App.4th 1794, 1802 [finding a presumption of fairness to exist if those four factors are met.].) In considering the amount of settlement, the Court is mindful that compromise is inherent and necessary in the settlement process. (Wershba, at p. 250.) The burden of establishing the fairness and reasonableness of the settlement is on the proponent. (7-Eleven Owners for Fair Franchising v. Southland Corp. (2000) 85 Cal.App.4th 1135, 1165-66.)

mediation session that was conducted at arm’s-length. (Genish Decl., ¶¶ 10,11; Konecky Decl., ¶ 9.) According to counsel, the parties attended a formal mediation session on April 18, 2022 with Tripper Ortman. (Genish Decl., ¶ 11.)

The parties do not give the court any reason to believe that the settlement was not reached through arm’s length settlement negotiations.¿¿This factor thus weighs in favor of a presumption of fairness.

Investigation and Discovery Sufficient to Allow Counsel and the Courts to Act intelligently

Mr. Genish attests that the parties engaged in informal discovery and investigation at the outset of the case and as a condition of mediation. (Genish Decl., ¶ 10.) He attests that Defendants produced relevant information through discovery, including the “start date of its operations in California, the total number of Temporary Health Professionals (“THP”) employed during the relevant time period, total number of locations where THPs were placed in California, and number of meal and rest period premiums paid. Defendant also provided excerpts from employee handbooks. Plaintiffs also obtained time and payroll data for Plaintiffs and a sample of the putative class, along with key data points including the class size and composition, the number of total workweeks worked, the number of locations, average rate of pay, and the number of terminated employees.” (Ibid.) The information was used to inform “intensive settlement negotiations” wherein each party debated the strengths and weaknesses of the claims. (Id. at ¶ 11.) This factor weighs in favor of fairness.¿¿¿

Jonathan M. Genish, Hali M. Anderson, Joshua Konecky, and Ashkan Shakouri attest to their experience in class actions and labor and employment cases. This factor weighs in favor of a presumption of fairness.

Mr. Genish attests that he has been practicing law since 2008. (Genish Decl., ¶ 3.) In 2018, he started his labor and employment law firm, which works on almost exclusively labor and employment class lawsuits, with 15% dedicated to other complex general litigation. (Id. at ¶ 5.) Mr. Genish attests that he is the managing partner of approximately 100 labor cases, 80% of which involve a wage-and-hour component. He provides numerous examples of class actions in which he held principal responsibility and that are ongoing or have successfully resolved. (Id. at ¶¶ 7-8.)

Ms. Anderson attests that that she has practiced employment law almost exclusively since her admission to the State Bar of California in 2008. (Anderson Decl., ¶ 4.) Since September 2018, she has represented employees. She also provides a substantial list of cases in which she has served as plaintiff’s counsel or class counsel. (Id. at ¶¶ 6-7.) In addition, she avers to the qualifications of other attorneys in her firm. (Id. at ¶¶ 8-12.)

Mr. Konecky has practiced employment, civil rights, and consumer law since 1997. (Konecky Decl., ¶ 5.) He has successfully litigated numerous class actions. (Konecky Decl., Ex. 1.)

Finally, Mr. Shakouri also attests to practicing employment law for over 15 years and complex employment litigation for over 13 years. (Shakouri Decl., ¶¶ 3-4.) He has prosecuted and successfully resolved at least five wage-and-hour class actions. (Id. at ¶ 5.)

The percentage of objectors cannot be determined¿at this time, and this factor¿does not weigh in favor or against a presumption of fairness.¿¿¿

Even if a presumption of fairness exists, the court still must “ ‘independently and objectively analyze the evidence and circumstances before it in order to determine whether the settlement is in the best interest of those whose claims will be extinguished.’ ” (Kullar v. Foot Locker Retail, Inc. (2008) 168 Cal.App.4th 116, 130.) “The well-recognized factors that the trial court should consider in evaluating the reasonableness of a class action settlement agreement include ‘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.” [Citation.] This list “ ‘is not exhaustive and should be tailored to each case.’ ” (Id. at p. 129.)

Plaintiffs’ counsel avers that the settlement is fair, reasonable, adequate, and in the interest of the parties. (Genish Decl., ¶ 33.) Notably, counsel’s declaration discusses the strengths, weaknesses, and risks of ongoing litigation. (Id. at ¶ 25-34.) For example, he raises a significant risk in obtaining class certification given that Defendant believes that the individual issues would predominate. (Id. at ¶ 77.) This risk is exacerbated by what counsel believes are recent trends in courts’ reluctance in certifying meal period claims. (Id. at ¶ 28.) He expresses similar concerns as to the rest period, minimum wage/overtime, and business expenses claims. (Id. at ¶¶ 29-31.) Finally, Mr. Genish concedes that even if class certification is obtained, it would be expensive and time-consuming to prove the amount of wages due to Class Members. This would require analysis of thousands of documents, contacting the members, and obtaining declarations. (Id. at ¶ 32.) Further, Plaintiff concedes that many employees reside out-of-state and only traveled to California for short-term job assignments. (Ibid.)

As to potential exposure, Plaintiff’s counsel attests that the maximum potential liability of Defendants is $49,019,493.00. (Genish Decl., ¶ 24.) This is broken down into $8,076,974.00 for meal period violations (25% violation rate), $8,076,974.00 for rest period violations (25% violation rate), $25,240,545.00 for unpaid wages (at 2 hours off-the-clock overtime per week), $3,645,000.00 for unpaid reimbursable business expenses (at $500 per employee), and $3,980,000.00 for wage statement penalties. The estimated PAGA penalty exposure was $7,316,100.00 for 73,161 aggregate workweeks at $100 per violation.

Factoring in the risks to that maximum liability, Mr. Genish discounted the figure by 50% to account for the possibility of not obtaining class certification. Counsel also discounted the figure by 40% independently based on the potential merits of the defense, resulting in an adjusted estimated liability of $4,901,949.30. (Genish Decl., ¶ 35.) The gross settlement amount represents approximately 75% of the adjusted estimated liability and results in an estimated average payout of $298.13 per Class Member. (Id. at ¶ 16.)

As to the PAGA claim, counsel considered the risk of success on the merits, and the risk of discretionary reduction of penalties by the Court based on any good faith arguments by Defendant as to compliance with its legal obligations. (Id. at ¶ 37.) Counsel avers that the $150,000.00 allocation represents 4.2% of the Gross Settlement Amount and is within the range of such settlements in state and federal cases that involve both a class action and PAGA claim. (Id. at ¶ 36.)

The Court concludes that the settlement is fair, adequate, and reasonable. (Kullar v. Foot Locker Retail, Inc., supra, 168 Cal.App.4th at p. 128.) The Court grants preliminary approval as to the class action settlement, including the allocation of PAGA penalties.

The Settlement Agreement authorizes an award of attorney fees to Class Counsel of not more than 1/3 of the Gross Settlement Amount, or approximately $1,216,666.67, and actual costs not to exceed $40,000.00. (Genish Decl., Ex. B, ¶ 3.2.2.)

The one-third fee award is reasonable and consistent with fee awards in class action cases.¿ (See¿Chavez v. Netflix, Inc.¿(2008) 162 Cal.App.4th 43, 66, fn. 11.) Counsel indicates that he will submit further details on the legal services provided, hourly rate, and time incurred in the Motion for Final Approval. (Genish Decl., ¶ 42.)

Incentive payments are based on the expense and risk undertaken by named plaintiffs for the benefit of other class members. (Munoz v. BCI Coca-Cola Bottling Co. of Los Angeles (2010) 186 Cal.App.4th 399, 412.)

In evaluating whether an incentive award is warranted, courts consider factors such as “ ‘the actions the plaintiff has taken to protect the interests of the class, the degree to which the class has benefitted from those actions, and the amount of time and effort the plaintiff expended in pursuing the litigation’ ” as well as the risk to a class representative, notoriety and personal difficulties, duration of litigation, and personal benefit. (Clark v. American Residential Services (2009) 175 Cal.App.4th 785, 804-807.)

The Settlement Agreement allows for an enhancement award to the named Plaintiffs that is included in the Gross Settlement Amount. (Genish Decl., Ex. B, ¶ 3.2.1.) Plaintiffs indicate that they have regularly conferred with their attorneys, providing documents, reviewing documents, providing information about the duties of other non-exempt employees, helping develop a strategy as to what documents and information to obtain from Defendant, and contacting potential witnesses. (Gnaedig Decl., ¶ 4-5; Clifford Decl., ¶ 11, 16; Weston Decl., ¶¶ 12-13; Walker Decl., ¶¶ 16-18.)

Here, the Plaintiffs attest to the unique risks posed by being a named party. For example, Plaintiff Walker attests that she would be responsible for Defendant’s litigation costs if the lawsuits were unsuccessful and that her name would appear through the internet if prospective employers conducted a search. (Walker Decl., ¶¶ 12-13.) Finally, Plaintiffs Walker and Gnaedig agreed to a general release of their claims, which is broader than the release for other Class Members. (Id. at ¶ 30; Gnaedig Decl., ¶ 9.)

The court finds that the proposed enhancement payment is reasonable based on the declarations from all four named Plaintiffs.¿

“The notice given should have a reasonable chance of reaching a substantial percentage of the class members” who do not search for such litigation. (Cartt v. Superior Court (1975) 50 Cal.App.3d 960, 974.) If the court grants preliminary approval of the settlement, it sets a final approval hearing and provides for notice to be given to the class. (Cal. Rules of Court, rule 3.769(e).) “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 trial court “ ‘ “has virtually complete discretion as to the manner of giving notice to class members.” [Citation.]’ ” (Cellphone Fee Termination Cases (2010) 186 Cal.App.4th 1380, 1390.)

Plaintiffs attached a copy of the proposed “Court Approved Notice of Class Action Settlement and Hearing Date for Final Court Approval” as Exhibit A to the Settlement Agreement. The Court has reviewed the proposed notice and finds that it will provide sufficient notice to the Class Members of the class action and their rights to request exclusion of the settlement, object to the settlement, and/or dispute the number of credited workweeks. The proposed notice contains sufficient information to inform Class Members of this litigation, the Final Approval Hearing, the nature of the lawsuit and the claims at issue, the proposed settlement terms, distribution formulas, calculations, and released claims. Furthermore, the notice informs the Class Members how to participate in the settlement (do nothing), how to opt-out of the settlement, how to object, and the date of the final approval hearing, and an estimate of the individual settlement payment.¿ (Genish Decl., Ex. B, Ex. A.)

The parties request court approval to appoint ILYM as the Settlement Administrator and up to $30,000.00 for administration costs. Given that ILYM will be responsible for distributing settlement payments for Class Members and PAGA Group Members, the Court finds that the requested amount of $30,000.00 is reasonable.

[1] Mr. Genish’s declaration indicates that only Plaintiff Alexander Gnaedig will receive the $10,000.00 enhancement award. But the calculation for the Net Settlement Amount (and filed declarations of the named Plaintiffs) appears to contemplate $10,000.00 awards to the three added Plaintiffs as well: Akimasia Walker, Amy Weston, and Janet Clifford.