Judge: John J. Kralik, Case: 19BBCV00362, Date: 2023-01-06 Tentative Ruling


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Case Number: 19BBCV00362    Hearing Date: January 6, 2023    Dept: NCB

 

Superior Court of California

County of Los Angeles

North Central District

Department B

 

 

belen hernandez, individually, and on behalf of other aggrieved employees pursuant to the California Private Attorneys General Act,

                        Plaintiff,

            v.

MORPHE, INC., et al., 

                        Defendants.

 

 

  Case No.:  19BBCV00362

   

  Hearing Date:  January 6, 2023

 

 [TENTATIVE] order RE:

motion for final approval of class action settlement, attorneys’ fees, costs, and service award  

 

BACKGROUND

A.    Allegations

On April 30, 2019, Plaintiff Belen Hernandez (“Plaintiff”) commenced this action for enforcement under the Private Attorneys General Act (“PAGA”), California Labor Code, § 2968, et seq. against Defendants Morphe, Inc. and Morphe LLC (“Defendants”).  Plaintiff alleges that she and other aggrieved hourly-paid or non-exempt employees were employed by Defendants and Defendants had failed to compensate them for all hours worked and missed meal period or rest periods.  Plaintiff alleges wage-and-hour violations against Defendants, including failure to pay overtime, provide meal and rest periods, pay minimum wages, timely pay wages during employment and upon termination, provide complete accurate wage statements, keep complete and accurate payroll records, and reimburse necessary business-related expenses and costs.

On September 3, 2021, Plaintiff filed the First Amended Class Action Complaint (“FAC”) against Defendants for: (1) violation of Labor Code, §§ 510, 1198 (unpaid overtime): (2) violation of Labor Code, §§226.7, 512(a) (unpaid meal period premiums); (3) violation of Labor Code, § 226.7 (unpaid rest period premiums); (4) violation of Labor Code, §§ 1194, 1197, 1197.1 (unpaid minimum wages); (5) violation of Labor Code, §§ 201, 202 (final wages not timely paid); (6) violation of Labor Code, § 204 (wages not timely paid during employment); (7) violation of Labor Code, § 226(a) (non-compliant wage statements); (8) violation of Labor Code, § 1174(d) (failure to keep requisite payroll records); (9) violation of Labor Code, §§ 2800 and 2802 (unreimbursed business expenses); (10) violation of Business & Professions Code, §§ 17200 et seq.; and (11) violation of Labor Code, §§ 2698, et seq. (PAGA). 

B.     Relevant Background

On July 28, 2020, the parties participated in private mediation with mediator Mark S. Rudy.  (Settlement Agreement at p.1.)  As a result, the parties entered the Stipulation of Settlement of Class and PAGA Claims (“Settlement Agreement”).

On September 2, 2020, a Post-Mediation Status Conference came for hearing.  Counsel advised the Court that the parties had reached a settlement in mediation. 

On January 15, 2021, the parties filed a Joint Response to OSC re Dismissal (Settlement), stating that they reached a class-wide settlement and, thus, seek the Court’s approval pursuant to CRC Rule 3.769(a). 

On July 14, 2022, the Court granted Plaintiff’s motion for preliminary approval of the settlement.    

C.     Motion on Calendar

On December 13, 2022, Plaintiff filed a motion for final approval of class action settlement.  The motion is unopposed.

DISCUSSION

A.                SETTLEMENT CLASS DEFINITION

The parties stipulate and agree to the conditional certification of the class for purposes of this settlement only.  (Settlement Agreement, at p.2.)  The proposed settlement class is defined as: “[A]ll current and former non-exempt retail employees who worked for Defendants in California during the Settlement Period.”  (Id., §II.A.4.)  “Settlement Period” means the period from April 29, 2015 through the date of the order approving Plaintiff’s Motion for Preliminary Approval of Class Action Settlement.  (Id., §II.A.31.) 

“PAGA Employees” is defined as Plaintiff and all Class Members who worked for Defendant in California during the PAGA Period.  (Id., §II.A.16.)  The “PAGA Period” means the period from February 20, 2018 through the date of the order approving Plaintiff’s Motion for Preliminary Approval of Class Action Settlement.  (Id., §II.A.18.) 

B.                 TERMS OF SETTLEMENT AGREEMENT

A copy of the fully executed Stipulation of Settlement of Class and PAGA Claims (“Settlement Agreement”) is attached as Exhibit 1 to the declaration of Brian J. St. John, which was filed with the renewed motion for preliminary approval.  The Settlement Agreement was entered between Plaintiff (on behalf of herself and on behalf of the State of California and all allegedly aggrieved employees) and FORMA Brands, LLC, Morphe, Inc. and Morphe LLC (“the Company”).  The essential terms are as follows:

·         The Maximum Settlement Amount (“MSA”) is $750,000, non-reversionary.  The MSA includes all individual settlement payments to class members, individual PAGA payments to PAGA employees, the LWDA payment, attorney’s fees and costs to class counsel, Plaintiff’s service award, and settlement administration costs.  (§§II.A.13, II.B.2.) 

·         The Net Settlement Amount (“Net”) ($433,250) is the MSA less (§§II.A.14, II.B.2):

o   Up to $262,500 (35%) for attorney fees (§II.B.2);

o   Up to $13,000 for attorney costs (§II.B.2);

o   $7,500 for a service award to the class representative (§II.A.26);

o   Up to $15,000 for claims administration costs (§II.A.28); and

o   Payment of $18,750 (75% of $25,000 PAGA penalty) to the LWDA (§II.B.2).

·         Defendant will pay the employer-side payroll taxes due on the wages portion of the individual settlement payments.  This will be a separate additional obligation of Defendants from the MSA.  (§II.A.13.) 

·         Escalator: “There were approximately 18,000 Qualifying Workweeks worked by Class Members during the period from June 22, 2016 to March 16, 2020. Should the total number of Qualifying Workweeks increase by more than eight percent (8%) of the number of Qualifying Workweeks during the period from June 22, 2016 to March 16, 2020 (i.e., more than 1,440 workweeks), the Company shall increase the Maximum Settlement Amount on a pro-rata basis equal to the percentage increase in the number of workweeks worked by the Class Members above eight percent (8%) (e.g., if the number of workweeks increases by 9% to 19,620 workweeks, the\Maximum Settlement Amount will increase by 1%).”  (§ II.C.7.)

·         The settlement is subject to an opt-out procedure.  Class Members who timely submit requests to opt out of the settlement (Request for Exclusion) will not participate in the settlement and will not be bound by its terms.  All PAGA Employees will be bound by the settlement and release of the PAGA Released Claims.   (§II.C.8.iv.) 

·         Response Deadline” is the “deadline by which Class Members must postmark to the Settlement Administrator any Requests for Exclusion, Objections, or Workweek Disputes. The Response Deadline will be sixty (60) calendar days after the Settlement Administrator first mails the Class Notice. If the 60th day falls on a Sunday or holiday, the Response Deadline will be the next business day that is not a Sunday or holiday The Response Deadline will be extended by ten (10) calendar days for any Class Member that receives a re-mailed Class Notice.”  (§II.A.25.)

·         Individual Class Settlement Payment Calculation: “The amount of each Settlement Class Members Individual Settlement Payment will be calculated by (a) dividing the Net Settlement Amount by the total number of Qualifying Workweeks for all Settlement Class Members that occurred during the Settlement Period and (b) multiplying the result by each individual Settlement Class Member’s number of Qualifying Workweeks that occurred during the Settlement Period. Payments will be reduced as necessary to account for mandatory payroll withholdings. Recipients of payments pursuant to this Settlement Agreement are exclusively responsible for all other tax obligations.”  (§II.C.17.) 

o   Tax Treatment: 20% wages and 80% as penalties and interest.  (§II.C.20.)

·         Individual PAGA Settlement Fund Payment Calculation: “Each PAGA Employee, regardless of whether he or she opts out, will receive an Individual PAGA Payment. The PAGA Payment shall be allocated pro-rata on a pay period basis to all PAGA Employees for all pay periods during which PAGA Employees worked in California during the PAGA Period. The amount of each PAGA Employee’s Individual PAGA Payment will be calculated by (a) dividing the PAGA Employee Amount by the total number of PAGA Pay Periods for all PAGA Employees that occurred during the PAGA Period and (b) multiplying the result by each individual PAGA Employee’s number of PAGA Pay Periods that occurred during the PAGA Period. Recipients of payments pursuant to this Settlement Agreement are exclusively responsible for all tax obligations. If the PAGA Employee submitted a timely and valid Request for Exclusion, he or she will receive only their Individual PAGA Payment; if the PAGA Employee has not opted out, he or she will receive their Individual PAGA Payment in addition to the amount they will receive based on C.18, above.”  (§II.C.19.)

o   Tax Treatment: 100% as penalties and interest.  (§II.C.20.)

·         Uncashed Settlement Payment Checks: Class Members have 180 days or else the uncashed checks will be deposited in the California unclaimed Property Fund in the name of the Class Member.  (§II.C.17.) 

·         Effective Date means: “the date this Settlement is approved as provided herein and the Court’s order granting Settlement Approval of both the PAGA and class claims and entry of the Final Approval Order and Judgment becomes final and is no longer appealable. For purposes of this Settlement, “becomes final and is no longer appealable” means the later of: (a) the day after the last date by which a notice of appeal to the applicable Court of Appeal of the order and judgment approving this Settlement may be timely filed and none is filed (i.e., 30 days from notice of entry of judgment); (b) if an appeal is filed, and the appeal is finally disposed of by ruling, dismissal, denial, or in any other manner that confirms the validity of the order and judgment, the day after the last date for filing a request for further review of the order and judgment approving this Settlement passes, and no further review is requested; or (c) if an appeal is filed and the order approving this Settlement is affirmed and further review of the order is requested, the day after the review is finally resolved and the order and judgment approving this Settlement is affirmed. The Effective Date cannot occur, and Defendants will not be obligated to fund this Settlement, until and unless there is no possibility of an appeal or further appeal that could potentially prevent this Settlement from becoming final and binding.  (§II.A.8.)

·         The proposed settlement was submitted to the LWDA on September 10, 2021.  (St. John Decl., Ex. 2.) 

·         Simpluris will perform settlement administration.  (Mot. at p.22.)   

·         Notice of Final Judgment will be posted on the settlement administrator’s website for a period of at least 60 days.  (Mot. at p.23.) 

C.                ANALYSIS OF SETTLEMENT AGREEMENT

1.      Standards for Final Fairness Determination

Before final approval, the court must conduct an inquiry into the fairness of the proposed settlement.”  (Cal. Rules of Court, rule 3.769(g).)  “If the court approves the settlement agreement after the final approval hearing, the court must make and enter judgment.  The judgment must include a provision for the retention of the court's jurisdiction over the parties to enforce the terms of the judgment.  The court may not enter an order dismissing the action at the same time as, or after, entry of judgment.”  (Cal. Rules of Court, rule 3.769(h).)

            In a class action lawsuit, the court undertakes the responsibility to assess fairness in order to prevent fraud, collusion or unfairness to the class, the settlement or dismissal of a class action.  The purpose of the requirement [of court review] is the protection of those class members, including the named plaintiffs, whose rights may not have been given due regard by the negotiating parties.”  (See Consumer Advocacy Group, Inc. v. Kintetsu Enterprises of America (2006) 141 Cal. App.4th 46, 60 [internal quotation marks omitted]; see also Wershba v. Apple Computer, Inc. (2001) 91 Cal.App.4th 224, 245 (“Wershba”), disapproved on another ground in Hernandez v. Restoration Hardware (2018) 4 Cal.5th 260 [Court needs to “scrutinize 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”] [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.’”  (See Wershba, supra, 91 Cal.App.4th at pg. 245 [citing Dunk v. Ford Motor Co. (1996) 48 Cal.App.4th 1794, 1802. (“Dunk”)].)  Notwithstanding an initial presumption of fairness, “the court should not give rubber-stamp approval.”  (See Kullar v. Foot Locker Retail, Inc. (2008) 168 Cal.App.4th 116, 130 (“Kullar”).)  Rather, to protect the interests of absent class members, the court 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.” (Ibid.)  In that determination, the court should consider 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 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.” (Id. at 128.)  Th[is] 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 supra, 91 Cal.App.4th at pg. 245.)

            Nevertheless, “[a] settlement need not obtain 100 percent of the damages sought in order to be fair and reasonable.  Compromise is inherent and necessary in the settlement process.  Thus, even if ‘the relief afforded by the proposed settlement is substantially narrower than it would be if the suits were to be successfully litigated,’ this is no bar to a class settlement because ‘the public interest may indeed be served by a voluntary settlement in which each side gives ground in the interest of avoiding litigation.’” (Wershba, supra, 91 Cal.App.4th at pg. 250.)

 

2.      Does a presumption of fairness exist?

a.       Was the settlement reached through arm’s-length bargaining?  Yes.  (Aiwazian Decl., ¶8.)

b.      Were investigation and discovery sufficient to allow counsel and the court to act intelligently?  Yes.  (Id., ¶¶5-8.)

c.       Is counsel experienced in similar litigation?  Yes.  Class Counsel is experienced in class action litigation, including wage and hour class actions. (Id., ¶¶13-18.)  

d.      What percentage of the class has objected?  Zero. (Burton Decl., ¶11.)

            CONCLUSION:  The settlement is entitled to a presumption of fairness.

3.      Is the settlement fair, adequate, and reasonable?

a.       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, supra at 130.

Class Counsel believes that there is sufficient evidence to support the allegations made in the lawsuit.  (St. John Decl. re Preliminary Approval, ¶16.)  Class Counsel provides the estimates of the value of the claims, as well as their consideration of Defendant’s defenses.  (Id., ¶¶21-25.)  Counsel provides a breakdown of the potential and realistic values of each of the claims for failure to pay overtime wages, failure to pay minimum wages, failure to provide compliant meal and rest periods, failure to timely pay wages during employment, failure to timely pay wages after termination and waiting time penalties, failure to provide complaint wage statements, failure to maintain payroll records, failure to reimburse necessary business expenses, and PAGA penalties.  (Id., ¶25(a)-(j).) 

b.      Risk, expense, complexity and likely duration of further litigation.  Given the nature of the class claims, the case is likely to be expensive and lengthy to try.  Procedural hurdles (e.g., motion practice and appeals) are also likely to prolong the litigation as well as any recovery by the class members. 

c.       Risk of maintaining class action status through trial.  Even if a class is certified, there is always a risk of decertification.   (Weinstat v. Dentsply Intern., Inc. (2010) 180 Cal.App.4th 1213, 1226 [“Our Supreme Court has recognized that trial courts should retain some flexibility in conducting class actions, which means, under suitable circumstances, entertaining successive motions on certification if the court subsequently discovers that the propriety of a class action is not appropriate.”].)

d.      Amount offered in settlement.  As indicated above, the Maximum Settlement Amount is $750,000.  In the order on the motion for preliminary approval, the Court stated that if it approved all maximum requested deductions, approximately $433,250 would be available for automatic distribution to participating class members, or $1,328.98 in average distributions to members ($433,250 NSA ÷ 326 class members = $1,328.98).  At that time, Counsel estimated the NSA would be $427,000.  (St. John Decl. re Preliminary Approval, ¶14.) 

In the motion for final approval, Plaintiff states that the NSA was $428,380.57.  Based on Simpluris’ calculation (which makes estimates from a $427,000 NSA), the highest individual PAGA payment will be $45.44 while the average individual PAGA payment will be $11.47, as there are 535 PAGA employees.  (Burton Decl., ¶¶13-14.)  The highest individual settlement payment is estimated to be $4,033.38 and the average individual settlement payment is estimated to be $794.95.  (Id., ¶15.)  Defendant will pay an additional $17,037.30 in estimated employer taxes in addition to the GSA.  (Id., ¶16.) 

e.       Extent of discovery completed and stage of the proceedings.  As discussed above, at the time of the settlement, Class Counsel had conducted extensive discovery.

f.        Experience and views of counsel.  The settlement was negotiated and endorsed by Class Counsel who, as indicated above, are experienced in class action litigation, including wage and hour cases.  Based upon their investigation and analysis, the attorneys representing Plaintiff and the class are of the opinion that this settlement is fair, reasonable, and adequate. (Aiwazian Decl., ¶21.) 

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

h.      Reaction of the class members to the proposed settlement.

                              Number of class members:                  550         

                              Number of notices mailed:                  545         

                              Number of undeliverable notices:       5                

                              Number of opt-outs:                           0                  

                              Number of objections:                                    0                  

                                    Number of participating class members:        550 (100%)[1]

                                    (Burton Decl., ¶¶5-11.) 

      CONCLUSION:  The settlement can be preliminarily deemed “fair, adequate, and reasonable.”

4.      May conditional class certification be granted?

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. 591, 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, supra at 1807, fn. 19.  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, supra at 240.

CONCLUSION: Based on information presented to the Court prior to preliminary approval, the Court finds that Class Members are numerous and ascertainable, and that a community of interest exists as to the settlement class.

D.                ATTORNEY FEES AND COSTS

            Class Counsel requests $262,500 (35% of the $750,000) for attorney fees and $11,619.49 for costs.  The fees requested was the amount requested in the Settlement Agreement.  The costs originally requested were $13,000. 

In determining the appropriate amount of a fee award, courts may use the lodestar method, applying a multiplier where appropriate. (PLCM Group, Inc. v. Drexler (2000) 22 Cal.4th 1084, 1095-96.) A percentage calculation is permitted in common fund cases. (Laffitte v. Robert Half Int’l, Inc. (2016) 1 Cal.5th 480, 503.)  Despite any agreement by the parties to the contrary, courts have an independent responsibility to review an attorney fee provision and award only what it determines is reasonable. (Garabedian v. Los Angeles Cellular Telephone Company (2004) 118 Cal.App.4th 123, 128.)

In the instant case, fees are sought pursuant to the percentage method. (Mot. for Final Approval at p.16.)  The $262,500 fee request is 35% of the Maximum Settlement Amount, which is average. (In re Consumer Privacy Cases (2009) 175 Cal.App.4th 545, 558, fn. 13 [“Empirical studies show that, regardless whether the percentage method or the lodestar method is used, fee awards in class actions average around one-third of the recovery.”].)

Plaintiff also argues that the lodestar analysis supports the attorneys’ fee award.  (Mot. for Final Approval at p.25.)  Plaintiff argues that a blended rate of $700 per hour for 426.10 hours spent on this case would be valued at $498,270, which is higher than the $262,500 amount sought by Class Counsel under the percentage method.  (Aiwazian Decl., ¶11, Ex. A.)  The timekeeping record for Class Counsel is attached as Exhibit A to the Declaration of Mr. Aiwazian.

Here, the $262,500 fee request represents a reasonable percentage of the total funds paid by Defendant.  Further, the notice expressly advised class members of the fee request, and no one objected. (Notice, §3.)  Accordingly, the Court awards fees in the amount of $262,500.

As for costs, Class Counsel requests $11,619.49.  A higher amount of up to $13,000 was disclosed to Class Members in the Notice, and no objections were received.  (Notice, §3.)  Class Counsel incurred actual costs in the amount of $11,619.49. (Aiwazian Decl., ¶19, Ex. B.) Costs include filing fees, remote hearing fees, postage fees, attorney service fees, mediation fees, and document download fees. (Id.) 

The costs appear to be reasonable and necessary to the litigation, are reasonable in amount, and were not objected to by the class. 

For all of the foregoing reasons, costs of $11,619.49 are approved.

E.        INCENTIVE AWARD TO CLASS REPRESENTATIVE

An incentive fee award to a named class representative must be supported by evidence that quantifies time and effort expended by the individual and a reasoned explanation of financial or other risks undertaken by the class representative.  (See Clark v. American Residential Services LLC (2009) 175 Cal.App.4th 785, 806-807; see also Cellphone Termination Cases (2010) 186 Cal.App.4th 1380, 1394-1395 [“Criteria courts may consider in determining whether to make an incentive award include: (1) the risk to the class representative in commencing suit, both financial and otherwise; (2) the notoriety and personal difficulties encountered by the class representative; (3) the amount of time and effort spent by the class representative; (4) the duration of the litigation and; (5) the personal benefit (or lack thereof) enjoyed by the class representative as a result of the litigation. (Citations.)”].) 

Here, the Class Representative Belen Hernandez requests enhancement awards totaling $7,500. 

In her declaration, Plaintiff states that she has been employed by Morphe, Inc. and Morphe LLC as an hourly-paid non-exempt employee from February 2017 to May 2018.  (Hernandez Decl., ¶2.)  Plaintiff states that she decided to seek legal advice about her work experience with Morphe and spoke with class counsel.  (Id.)  She states that after speaking with counsel, she investigated representative and class action lawsuits for 7 hours, consulted with class counsel for 6 hours, and spent over 17 hours meeting with counsel regarding the case and her responsibilities as a class and PAGA representative.  (Id., ¶¶2-3.)   She states that she spent at least 13 additional hours speaking with counsel about the case and 6 hours reviewing the settlement and asking questions.  (Id., ¶¶4-5.)  Plaintiff believes that she has done everything class counsel asked her to do and to represent the class.  (Id., ¶6.) 

In light of the above, as well as the benefits obtained on behalf of the class after approximately 3 years of litigation, the amount of $7,500 for the class representative appears to be a reasonable inducement for the named Plaintiff’s participation in this case.  Accordingly, enhancement award in the requested amount is approved.

F.         CLAIMS ADMINISTRATION COSTS

            Claims administrator, Simpluris, Inc. requests $15,000 in compensation for its work in administrating this case. (Burton Decl., ¶17.)  At the time of preliminary approval, costs of settlement administration were estimated at $15,000. Class Members were provided with notice of this amount and did not object. (Id., ¶11.)

            Accordingly, claims administration costs are approved in the amount of $15,000.

CONCLUSION AND ORDER

The Court hereby:

(1)         Grants class certification for purposes of settlement;

(2)         Grants final approval of the settlement as fair, adequate, and reasonable;

(3)         Awards $262,500 in attorney fees to Class Counsel, Lawyers for Justice, PC;

(4)         Awards $11,619.49 in litigation costs to Class Counsel;

(5)         Approves payment of $18,750 (75% of $PAGA penalty) to the LWDA;

(6)         Awards $7,500 as a Class Representative Service Award to Plaintiff/Class Representative Belen Hernandez;

(7)         Awards $15,000 in claims administration costs to Simpluris, Inc.;

(8)         Orders class counsel to lodge a proposed Judgment, consistent with this ruling and containing the class definition, and full release language, by January 17, 2023;

(9)         Orders class counsel to provide notice to the class members pursuant to California Rules of Court, rule 3.771(b); and

(10)     A Non-Appearance Case Review re: Final Report re: Distribution of Settlement Funds is set for March 8, 2023 at 8:30 a.m.  Final Report is to be filed by March 1, 2023.

 

 


[1] The settlement is subject to an opt-out procedure. Hence, any individual who has not opted-out will participate in the settlement.