Judge: David S. Cunningham, Case: 21STCV40218, Date: 2024-01-09 Tentative Ruling

Case Number: 21STCV40218    Hearing Date: January 9, 2024    Dept: 11

JORGE BERNARDO v. AMANECER COMMUNITY COUNSELING SERVICE

MOTION FOR PRELIMINARY APPROVAL OF CLASS ACTION SETTLEMENT

Date of Hearing: January 9, 2024

Department: SSC-11

Case No.: 21STCV40218

TENTATIVE RULING

The Court GRANTS preliminary approval of the Settlement Agreement and finds as follows:

(1) The settlement appears to be in the range of reasonableness of a settlement that could ultimately be granted final approval by the Court;

(2) Grant conditional class certification;

(3) Appoint Aegis Law Firm, PC as Class Counsel;

(4) Appoint Plaintiff Jorge Bernardo as Class Representative;

(5) Approve the notice;

(6) Set the scheduled matters as indicated below; and

(7) Plaintiff’s counsel shall file a proposed Order, consistent with this ruling by __________________, 2024.

PRELIMINARY APPROVAL OF CLASS ACTION SETTLEMENT

            As a “fiduciary” of the absent class members, the trial court’s duty is to have before it sufficient information to determine if the settlement is fair, adequate, and reasonable.  (7-Eleven Owners for Fair Franchising v. The Southland Corp. (2000) 85 Cal.App.4^th 1135, 1151, citing Dunk v. Ford Motor Co. (1996) 48 Cal.App.4th 1794, 1801, 1802 (“Dunk”).)

            California Rules of Court, rule 3.769 governs settlements of class actions.  Any party to a settlement agreement may submit a written notice for preliminary approval of the settlement.  The settlement agreement and proposed notice to class members must be filed with the motion, and the proposed order must be lodged with the motion. California Rules of Court, rule 3.769(c).

            In determining whether to approve a class settlement, the court’s responsibility is to “prevent fraud, collusion or unfairness to the class” through settlement and dismissal of the class action because the rights of the class members, and even named plaintiffs, “may not have been given due regard by the negotiating parties.”  (Consumer Advocacy Group, Inc. v. Kintetsu Enterprises of America (2006) 141 Cal.App.4^th 46, 60.)

FAIRNESS OF THE SETTLEMENT AGREEMENT

            In an effort to aid the Court in the determination of the fairness of the settlement, Wershba v. Apple Computer, Inc. (2001) 91 Cal.App.4^th 224, 244-245 (“Wershba”), discusses factors that the Court should consider when testing the reasonableness of the settlement.

            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 at 245, citing Dunk at 1802.)  The test is not the maximum amount plaintiff might have obtained at trial on the complaint but, rather, whether the settlement is reasonable under all of the circumstances.  (Wershba at 250.)

            In making this determination, the Court considers all relevant factors including “the strength of [the] 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.’”  (Kullar v. Foot Locker Retail, Inc. (2008) 168 Cal.App.4th 116, 128 (“Kullar”), citing Dunk at 1801.)

            “The fact that a proposed settlement may only amount to a fraction of the potential recovery does not, in and of itself, mean that the proposed settlement is grossly inadequate and should be disapproved.”  (City of Detroit v. Grinnell Corporation (2d Cir. 1974) 495 F.2d 448, 455; see also Linney v. Cellular Alaska Partnership (9th Cir. 1998) 151 F.3d 1234, 1242 (“[I]t is the very uncertainty of outcome in litigation and avoidance of wasteful and expensive litigation that induce consensual settlements.  The proposed settlement is not to be judged against a hypothetical or speculative measure of what might have been achieved by the negotiators.”)

TERMS OF SETTLEMENT AGREEMENT

·         “Class” all California citizens currently or formerly employed by Defendant as a non-exempt employee in the State of California at any time during the Class Period. (¶1.5)

• “Class Period” means the period from November 2, 2017 to November 10, 2022. (¶1.12)
• “Aggrieved Employee” means all California citizens currently or formerly employed by Defendant as a non-exempt employee in the State of California at any time during the PAGA Period. (¶1.4)
• “PAGA Period” means the period from November 2, 2020 to November 10, 2022. (¶1.31)
• “Participating Class Member” means a Class Member who does not submit a valid and timely Request for Exclusion from the Settlement. (¶1.35)
• The Parties stipulate to class certification for settlement purposes only. (¶12.1)

The Gross Settlement Amount (“GSA”) is $182,500, non-reversionary. (¶3.1) 

·         Escalator Clause: Based on its records, Defendant estimates that, as of the date of this Settlement Agreement, there are 231 Class Members and 24,703 Total Workweeks during the Class period. If the number of Class Members during the Class Period exceeds 231 or the number of Total Workweeks during the Class Period exceeds 24,703 by more than 5%, the Gross Settlement Amount will increase pro rata per additional Class Member or additional Workweek, whichever is greater. (¶9)

The Net Settlement Amount (“Net”) of $65,866.67 is the GSA minus:

• Up to $60,833.33 (33 1/3%) for attorneys’ fees (¶3.2.2);
• Up to $25,000 for attorneys’ costs (Ibid.);
• Up to $10,000 for a Service Payment to the class representative (¶3.2.1);
• Up to $5,800 for costs of settlement administration (¶3.2.3); and
• Payment of $15,000 (75% of $20,000 PAGA penalty) to the LWDA (¶3.2.5).

Defendant shall separately pay any and all employer payroll taxes owed on the Wage Portions of the Individual Class Payments. (¶3.1)

No Claim Requirement. Class Members shall not be required to submit a claim form in order to receive an individual settlement payment. (¶3.1)

Response Deadline. “Response Deadline” means 60 days after the Administrator mails Class Notices to Class Members and Aggrieved Employees, and shall be the last date on which Class Members may: (a) fax, email, or mail Requests for Exclusion from the Settlement, or (b) fax, email, or mail his or her Objection to the Settlement. Class Members to whom Class Notices are re-mailed after having been returned undeliverable to the Administrator shall have an additional 14 calendar days beyond the Response Deadline has expired. (¶1.43) The same deadline applies to the submission of workweek disputes. (¶8.6)

Calculation of Individual Settlement Payments: Each Participating Class Member will receive an Individual Class Payment calculated by (a) dividing the Net Settlement Amount by the total number of Workweeks worked by all Participating Class Members during the Class Period and (b) multiplying the result by each Participating Class Member’s workweeks. (¶3.2.4) Non-Participating Class Members will not receive any Individual Class Payments. The Administrator will retain amounts equal to their Individual Class Payments in the Net Settlement Amount for distribution to Participating Class Members on a pro rata basis. (¶3.2.4.2)

·         PAGA Payments: The Administrator will calculate each Individual PAGA Payment by (a) dividing the amount of the Aggrieved Employees’ 25% share of PAGA Penalties ($5,000) by the total number of PAGA Period Workweeks worked by all Aggrieved Employees during the PAGA Period and (b) multiplying the result by each Aggrieved Employee’s PAGA Period Workweeks. (¶3.2.5.1)

·         Tax Allocation: Individual Class Payment to the Class Members shall be allocated as follows: 60% to wages, 40% to penalties and interest. (¶3.2.4.1) The Administrator will report the Individual PAGA Payments on IRS 1099 Forms. (¶3.2.5.2)

Funding of the Settlement. Defendant shall fund one-half of the Gross Settlement Amount and one-half of its share of payroll taxes by November 1, 2023 contingent on the Court granting Preliminary Approval. Defendant shall fund the remainder of the Gross Settlement Amount and its share of payroll taxes by May 1, 2024. (¶4.3)

Distribution of Settlement. Within 14 days after Defendant funds the Gross Settlement Amount, the Administrator will mail checks for all Individual Class Payments, all Individual PAGA Payments, the LWDA PAGA Payment, the Administration Expenses Payment, the Class Counsel Fees Payment, the Class Counsel Litigation Expenses Payment, and the Class Representative Service Payment. Disbursement of the Class Counsel Fees Payment, the Class Counsel Litigation Expenses Payment and the Class Representative Service Payment shall not precede disbursement of the Individual Class Payments and Individual PAGA Payments. (¶4.4)

Uncashed Checks. The face of each check shall prominently state the date (not less than 180 days after the date of mailing) when the check will be voided. The Administrator will cancel all checks not cashed by the void date. (¶4.4.1) For any Class Member whose Individual Class Payment check or Individual PAGA Payment check is uncashed and cancelled after the void date, the Administrator shall transmit the funds represented by such checks to the Controller’s Unclaimed Property Fund in the name of the Class Member thereby leaving no “unpaid residue” subject to the requirements of California Code of Civil Procedure § 384(b). (¶4.4.3)

The Parties agree to use ILYM Group, Inc. as the Settlement Administrator. (¶1.2)

Notice of Final Judgment will be posted on the administrator’s website. (¶8.8.1)

The proposed Settlement Agreement was submitted to the LWDA on June 14, 2023. (Declaration of Jessica L. Campbell (“Campbell Decl.”), Exhibit 4.)

All class members who do not opt out will release certain claims, discussed in detail below.

ANALYSIS OF SETTLEMENT AGREEMENT

A. Does a Presumption of Fairness Exist?

            1. Was the Settlement reached through arm’s-length bargaining?  On November 10, 2022, the Parties attended a mediation session with Gig Kyriacou which ultimately resulted in settlement. (Campbell Decl. ¶6.)

2. Were investigation and discovery sufficient to allow counsel and the Court to act intelligently? Class Counsel represents that the parties proceeded with formal and informal discovery. Plaintiff served his first set of written discovery, seeking, inter alia, his personnel files, policy documents, the estimated total number of Class Members, the Class Members’ contact information, the Class Members’ job titles and positions, and Class Members’ timekeeping and pay records. Defendant also informally produced its tax returns, financial audits, a contract with government donors, and the pay summaries of the Class Members. (Id. at ¶5.) Counsel asserts that Defendant’s financial status was a factor considered in arriving at the proposed settlement. Defendant maintained that it had limited available funds from which to pay any settlement or judgment since it operates as a non-profit organization. (Id. at ¶15.) Class Counsel and their expert each reviewed Defendant’s tax returns and financial statements, which confirmed its status as a non-profit organization and reinforced that a significant amount of revenue came from government grants (approximately 95% in 2019 and approximately 99% in 2020). (Id. at ¶16.)

3. Is counsel experienced in similar litigation?  Yes. Class Counsel is experienced in complex litigation, including wage and hour class action cases. (Id. at ¶28.)

            4. What percentage of class has objected? This cannot be determined until the fairness hearing.  See Weil & Brown, Cal. Practice Guide: Civil Procedure Before Trial (The Rutter Group 2011) ¶ 14:139.18 (“Should the court receive objections to the proposed settlement, it will consider and either sustain or overrule them at the fairness hearing.”)

B. Is the settlement fair, adequate and reasonable?

            1. Strength of Plaintiffs’ case.  “The most important factor is the strength of the case for plaintiffs on the merits, balanced against the amount offered in settlement.”  (Kullar at 130.) 

Class Counsel has provided information, summarized below, regarding the maximum values of the claims asserted:

(MPA at pp. 10-13; Campbell Decl. ¶¶17-22.)

2. Risk, expense, complexity and likely duration of further litigation.  Further litigation carried the possibility of non-certification and unfavorable rulings on the merits on the above legal issues. 

            3. Risk of maintaining class action status through trial.  It would have been Plaintiff’s burden to maintain the class action through trial.        

4. Amount offered in settlement.  Plaintiff calculated Defendant’s maximum exposure as $11,435,100 and realistic exposure as $207,120. The GSA of $182,500 represents approximately 1.6% of Defendant’s maximum exposure and 88.1% of Defendant’s realistic exposure on the claims alleged, which, given the uncertain outcomes and Defendant’s financial condition, is within the “ballpark of reasonableness.”

Assuming the requested deductions are taken in full, $65,866.67 will remain for distribution to class members. Assuming full participation, each Class Member will receive approximately $285.13 after all other deductions are taken from the settlement amount. [$65,866.67 / 231 = $285.13]

5. Extent of discovery completed and the stage of the proceedings. As stated above, it appears that Class Counsel has completed sufficient discovery in order to make an informed decision.

            6. Experience and views of counsel. As indicated above, Class Counsel is experienced in class actions, including cases involving wage and hour violations. 

            7.  Presence of a governmental participant. This factor is not applicable here.

            8. Reaction of the class members to the proposed settlement. The class members’ reactions will not be known until they receive notice and are afforded an opportunity to object or opt-out.  This factor becomes relevant during the fairness hearing.

SCOPE OF RELEASE

Releases of Claims. Effective on the date when Defendant fully funds the entire Gross Settlement Amount and funds all employer payroll taxes owed on the Wage Portion of the Individual Class Payments, Plaintiff, Class Members, and Class Counsel will release claims against all Released Parties as follows: (¶6)

·         Release by Participating Class Members Who Are Not Aggrieved Employees: All Participating Class Members, on behalf of themselves and their respective former and present representatives, agents, attorneys, heirs, administrators, successors, and assigns, release Released Parties from (i) all claims that were alleged, or reasonably could have been alleged, based on the Class Period facts stated in the Operative Complaint and ascertained in the course of the Action. Except as set forth in Section 6.3 of this Agreement, Participating Class Members 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. (¶6.2)

·         Release by Non-Participating Class Members Who Are Aggrieved Employees: All Non-Participating Class Members who are Aggrieved Employees are deemed to release, on behalf of themselves and their respective former and present representatives, agents, attorneys, heirs, administrators, successors, and assigns, the Released Parties from all claims for PAGA penalties that were alleged, or reasonably could have been alleged, based on the PAGA Period facts stated in the Operative Complaint, and the PAGA Notice and ascertained in the course of the Action. (¶6.3)

o   “PAGA Notice” means Plaintiff’s November 2, 2021 letter to Defendant and the LWDA providing written notice pursuant to Labor Code § 2699.3(a). (¶1.33)

o   Because future PAGA claims are subject to claim preclusion upon entry of the Judgment, Non-Participating Class Members who are Aggrieved Employees are deemed to release the claims identified in Paragraph 6.3 of this Agreement and are eligible for an Individual PAGA Payment. (¶8.5.4)

·         Release by Aggrieved Employees: All Aggrieved Employees are deemed to release, on behalf of themselves and their respective former and present representatives, agents, attorneys, heirs, administrators, successors, and assigns, the Released Parties from all claims for PAGA penalties that were alleged, or reasonably could have been alleged, based on the PAGA Period facts stated in the Operative Complaint, and the PAGA Notice and ascertained in the course of the Action. (¶6.4)

·         Release by Participating Class Members Who Are Aggrieved Employees: All Participating Class Members who are also Aggrieved Employees are deemed to release on behalf of themselves and their respective former and present representatives, agents, attorneys, heirs, administrators, successors, and assigns, the Released Parties from all claims in paragraphs 6.2 and 6.4. (¶6.5)

·         “Released Parties” means: Defendant and each of its former and present directors, officers, shareholders, owners, managers, agents, principals, employees, members, attorneys, insurers, reinsurers, predecessors, successors, parents, assigns subsidiaries and affiliates. (¶1.41)

·         Named Plaintiff will additionally provide a general release and §1542 waiver. (¶6.1)

CONDITIONAL CLASS CERTIFICATION

A. Standards

            A detailed analysis of the elements required for class certification is not required, but it is advisable to review each element when a class is being conditionally certified.  (Amchem Products, Inc. v. Winsor (1997) 521 U.S. 620, 622-627.) The trial court can appropriately utilize a different standard to determine the propriety of a settlement class as opposed to a litigation class certification.  Specifically, a lesser standard of scrutiny is used for settlement cases.  (Dunk at 1807, fn. 19.)  Because a settlement eliminates the need for a trial, when considering whether to certify a settlement class, the court is not faced with the case management issues present in certification of a litigation class.  (Global Minerals & Metals Corp. v. Superior Court (2003) 113 Cal.App.4^th 836, 859.)  Finally, the Court is under no “ironclad requirement” to conduct an evidentiary hearing to consider whether the prerequisites for class certification have been satisfied.  (Wershba at 240.)

B. Analysis

1. Numerosity.  There are approximately 231 Class Members. (Campbell Decl. ¶8.) Thus, numerosity has been sufficiently established.

2. Ascertainability.  “A class is ascertainable, as would support certification under statute governing class actions generally, 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.” (Noel v. Thrifty Payless, Inc. (2019) 7 Cal.5th 955, 961.) Here, the class is defined above. Class members are ascertainable from Defendant’s records. (Campbell Decl. ¶8.)

3. Community of interest.  “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.’”  (Linder v. Thrifty Oil Co. (2000) 23 Cal.4th 429, 435.)

As to commonality, Plaintiff alleged that Defendant maintained uniform employment policies and/or practices that illegally deprived Class Members of lawful wages, meal periods, rest breaks, business expense reimbursement, accurate wage statements, payment of all wages upon separation from employment, and waiting time pay. Plaintiff’s allegations present common legal and factual questions of, inter alia, whether Defendant applied the same scheduling, timekeeping, minimum and overtime pay, meal period, and rest break policies to all Class Members; whether these policies and practices resulted in Labor Code violations; whether Defendant’s conduct was intentional; and whether Class Members are entitled to penalties. Plaintiff contends that these common questions could be resolved using Class Members’ schedules, time punches, and payroll records, Defendant’s corporate representative’s testimony, written communications between Defendant and Class Members, and Class Member declarations. (Campbell Decl. ¶9.)

As to typicality, Plaintiff alleges that he and other Class Members were employed by Defendant and injured by Defendant’s common wage and hour policies and practices, including Defendant’s scheduling, timekeeping, minimum wage pay, overtime pay, meal period, and rest break practices and policies. Through review of documents and information exchanged in formal discovery, including production of documents by Defendant, Plaintiff asserts that these common policies and practices similarly affected Plaintiff and the Class. (Id. at ¶10.)

As to adequacy, Plaintiff represents that he is aware of the duties of serving as class representative and has participated in the litigation. (Declaration of Jorge Bernardo.)

4.      Adequacy of class counsel.  As indicated above, Class Counsel is experienced in class actions, including cases involving wage and hour violations.

5.      Superiority.  Given the relatively small size of the individual claims, a class action appears to be superior to separate actions by the class members.

            Since the elements of class certification have been met, the class may be conditionally certified at this time.

NOTICE TO CLASS

A. Standard

            California Rules of Court, rule 3.769(e) provides: “If the court grants preliminary approval, its order must include the time, date, and place of the final approval hearing; the notice to be given to the class; and any other matters deemed necessary for the proper conduct of a settlement hearing.” Additionally, rule 3.769(f) states: “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.”

B. Form of Notice

            The proposed notice is attached to the Settlement Agreement.  The information provided in the proposed notice includes: a summary of the litigation, the nature and terms of the settlement, the proposed deductions from the gross settlement amount, the procedures for participating in, opting out of, or objecting to the settlement, and the time, date, and location of the final approval hearing.

The Class Notice will only be provided in English, since Defendant communicated with its employees in English, and the Parties agreed that an English-only notice will be sufficient. (MPA at 3:18-19.)

C. Method of Notice

            Not later than 21 days after the Court grants Preliminary Approval of the Settlement, Defendant will simultaneously deliver the Class Data to the Administrator, in the form of a Microsoft Excel spreadsheet. (¶4.2) Using best efforts to perform as soon as possible, and in no event later than 14 days after receiving the Class Data, the Administrator will send to all Class Members identified in the Class Data, via first-class United States Postal Service (“USPS”) mail, the Class Notice. (¶8.4.2)  

Not later than 3 business days after the Administrator’s receipt of any Class Notice returned by the USPS as undeliverable, the Administrator shall re-mail the Class Notice using any forwarding address provided by the USPS. If the USPS does not provide a forwarding address, the Administrator shall conduct a Class Member Address Search, and re-mail the Class Notice to the most current address obtained. The Administrator has no obligation to make further attempts to locate or send Class Notice to Class Members whose Class Notices are returned by the USPS a second time. (¶8.4.3)

The deadlines for Class Members’ written objections, Challenges to Workweeks, and Requests for Exclusion will be extended an additional 14 days beyond the 60 days otherwise provided in the Class Notice for all Class Members whose notice is re-mailed. The Administrator will inform the Class Member of the extended deadline with the re-mailed Class Notice. (¶8.4.4)

D. Cost of Notice

            The cost of settlement administration is estimated at $5,800 (¶3.2.3). This amount appears reasonable.  However, prior to the time of the final fairness hearing, the settlement administrator must submit a declaration attesting to the total costs incurred and anticipated to be incurred to finalize the settlement for approval by the Court.

ATTORNEY FEES AND COSTS

            California Rules of Court, rule 3.769(b) states: “Any agreement, express or implied, that has been entered into with respect to the payment of attorney fees or the submission of an application for the approval of attorney fees must be set forth in full in any application for approval of the dismissal or settlement of an action that has been certified as a class action.”

            Ultimately, the award of attorney fees is made by the Court at the fairness hearing, using the lodestar method with a multiplier, if appropriate. (PLCM Group, Inc. v. Drexler (2000) 22 Cal.4^th 1084, 1095-1096; Ramos v. Countrywide Home Loans, Inc. (2000) 82 Cal.App.4^th 615, 625-626; Ketchum III v. Moses (2000) 24 Cal.4^th 1122, 1132-1136.) In common fund cases, the Court may utilize the percentage method, cross-checked by the lodestar. (Laffitte v. Robert Half Int’l, Inc. (2016) 1 Cal.5^th 480, 503.) Despite any agreement by the parties to the contrary, “the court has an independent right and responsibility to review the attorney fee provision of the settlement agreement and award only so much as it determined reasonable.” (Garabedian v. Los Angeles Cellular Telephone Company (2004) 118 Cal.App.4^th 123, 128.)

            The question of whether class counsel is entitled to $60,833.33 (33 1/3%) in fees will be addressed at the fairness hearing when class counsel brings a noticed motion for attorney fees.

            Counsel should also be prepared to justify any costs sought (capped at $25,000) by detailing how such costs were incurred.

PROPOSED SCHEDULE OF SETTLEMENT PROCEEDINGS

The following schedule is proposed by the Court:

            Preliminary Approval Hearing – January 9, 2024

Deadline for Serving Notices to Class Members – February 13, 2024 (35 calendar days from preliminary approval)

Deadline for Requests for Exclusion and Objections – April 13, 2024 (60 calendar days from initial mailing)

Deadline for Class Counsel to File Motion for Final Approval of Settlement and Motion for Attorney Fees and Response to any Objections – _____ (16 court days prior to hearing)

Final Fairness Hearing and Final Approval – _____