Judge: Joseph Lipner, Case: 21STCV46151, Date: 2025-01-30 Tentative Ruling

Case Number: 21STCV46151    Hearing Date: January 30, 2025    Dept: 72

SUPERIOR COURT OF CALIFORNIA

COUNTY OF LOS ANGELES

DEPARTMENT 72

TENTATIVE RULING

            Plaintiffs Richard Booth (“Booth”); Cheryl Ferro (“Ferro”); and Brett Burkett (“Burkett”) (“Plaintiffs”) move for preliminary approval of the class action settlement between Plaintiffs and Defendants Frito-Lay, Inc.; Rolling Frito-Lay Sales; Frito-Lay North America, Inc.; and Frito-Lay Sales, Inc. (collectively, “Defendants”) and certification of the settlement class.

Given the very small proportion of the settlement amount to the potential recovery, the Court requests that the parties clarify what portion of the Class Members are estimated to be subject to arbitration agreements with class action waivers before determining whether the settlement is adequate.  The Court may need to continue this hearing to consider this issue.

Background

This is an employment law class action.

Plaintiffs and the putative class members were employed by Defendant during the class period of August 16, 2020 through October 17, 2023.

Plaintiff filed this action on December 17, 2021. The operative complaint is now the Second Amended Complaint (“SAC”), which raises claims for (1) civil penalties under the Private Attorney General Act (“PAGA”); (2) failure to provide meal periods; (3) failure to provide rest periods; (4) failure to pay overtime wages; (5) failure to pay vacation wages; (6) failure to indemnify; (7) failure to pay sick time; (8) unlawful pay deductions; (9) record-keeping violations; (10) failure to timely pay wages during employment; (11) failure to provide accurate written wage statements; (12) failure to timely pay all final wages; and (13) unfair competition.      

The SAC joins Brett Burkett as a named Plaintiff.

On September 20, 2024, Plaintiff filed this motion for preliminary approval.

Legal Standard

“(a) Court approval after hearing

A settlement or compromise of an entire class action, or of a cause of action in a class action, or as to a party, requires the approval of the court after hearing.

(b) Attorney's fees

Any agreement, express or implied, that has been entered into with respect to the payment of attorney's fees or the submission of an application for the approval of attorney's 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.

(c) Preliminary approval of settlement

Any party to a settlement agreement may serve and file a written notice of motion 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.

(d) Order certifying provisional settlement class

The court may make an order approving or denying certification of a provisional settlement class after the preliminary settlement hearing.

(e) Order for final approval hearing

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.

(f) Notice to class of final approval hearing

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.

(g) Conduct of final approval hearing

Before final approval, the court must conduct an inquiry into the fairness of the proposed settlement.

(h) Judgment and retention of jurisdiction to enforce

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(a).)

Discussion

SETTLEMENT CLASS DEFINITION

·        “Class Members” means all hourly-paid and/or non-exempt employees employed by Rolling Frito-Lay Sales, LP and Frito-Lay, Inc.in California at any time during the Class Period who do not opt out. (Setareh Decl., Ex. A (“Settlement”) §§ 1(C), (J).) The parties estimate that there are around 800 Class Members.

·        “Class Period” means the period of September 26, 2018 through 27, 2024, excluding any weeks covered by the settlements in Lopez v. Frito Lay, Inc., Los Angeles Superior Court Case No. 21STCV01652 and Stevens v. PepsiCo, Inc. et al., Case No. 22-cv-00802 (S.D.N.Y). (Settlement § 1(k).)

TERMS OF SETTLEMENT AGREEMENT

The essential terms are as follows:

·        The settlement Administrator will be Phoenix Class Action Administration Solutions (“Phoenix” or the “Administrator”).

·        The Settlement Fund amount is $3,500,000.00. (Settlement § X(E).) This amount is non-reversionary. (Proposed Order ¶ 12.)

o   Escalator Clause: The parties estimate certifies that the number of Workweeks for all class members during the Class Period is 643,552. If the number of Workweeks during the Class Period should exceed the Certified Workweek Amount by more than ten percent (10%), the Settlement Fund shall be increased by the percent difference in excess of 10%. (Settlement § X(E).) For example, if there is a 12% increase in the total Workweeks, the Settlement Fund will increase by 2%. (Ibid.)

·        The Payout Fund (estimated to be $2,093,333.33) is the Settlement Fund minus the following:

o   Up to $1,166,666.67 (33 1/3%) for attorney fees (Setareh Decl. ¶ 15);

o   Up to $30,000.00 for litigation costs (Ibid);

o   Up to $15,000.00 for service awards to each named Plaintiff in the amount of $5,000.00 per plaintiff. (Setareh Decl. ¶ 16.)

o   Up to $50,000 for settlement administration costs to be paid to Phoenix (Setareh Decl. ¶ 16.)

o   A payment of $187,500.00 to the LWDA regarding the PAGA claims. (Settlement § X(E)(f).)

o   Litigation costs for Plaintiffs’ attorneys, not to exceed $50,000.00. (Settlement § X(E)(e).)

o   Individual Settlement Payment Calculation: From the Payout Fund, the Administrator will calculate each Individual Settlement Award by dividing the Payout Fund by the total number of and then multiplying the resulting value by the number of Workweeks worked by each Class Member. (Settlement § X(E)(f)(2)(b).) Because DOT-regulated employees are exempt from California overtime requirements and meal and rest period requirements are preempted for these employees, non-DOT-regulated employees will receive twice the amount per workweek that DOT-regulated employees receive. (Settlement § X(E)(f)(2)(b).)

o   20 percent of each individual settlement payment will be the wage portion. The remaining 80 percent will be the penalties portion. (Settlement § X(E)(f)(2)(b).)

o   Phoenix will be responsible for calculating and issuing the payments and withholding all required state and federal taxes. (Settlement § X(E)(f)(2)(c).)

o   If a Class Member is not located or submits a timely and valid exclusion request the amount will be distributed among the remaining class members. (Settlement § X(E)(f)(2)(d).) If a Class Member fails to cash their check within 120 days, the funds will be held in the California Unclaimed Property Fund. (Settlement § X(E)(f)(2)(d).)

·        Defendant will provide the total number of Workweeks for each Class Member to the Administrator. (Settlement at p. 16.)

·        Response Deadline: The deadline by which Class Members must postmark or fax to the Administrator a valid Request for Exclusion, objection, or dispute will be forty-five (30) calendar days from the initial mailing of the Settlement Notices by the Administrator. (Settlement at pp. 17-18.)  

o   If 10% or more of Class members opt-out of the Class, Defendant shall have option to withdraw from Settlement Agreement within 2- days after receiving from the Administrator the final list of optouts. (Settlement at pp. 19-20.)

·        Funding of the settlement amount: Within 14 days after the effective date of the settlement, Defendants shall wire the Settlement Fund to Phoenix. (Settlement at p. 21.)

·        Disbursement: Promptly after payment of the Settlement Fund, but no later than 30 calendar days the effective date of the settlement, the Administrator will mail the individual payment checks. (Settlement at p. 21.)

·        Participating class members and the named Plaintiff will release certain claims against Defendant. (See further discussion below)

ANALYSIS OF SETTLEMENT AGREEMENT

1. Does a presumption of fairness exist?

1. Was the settlement reached through arm’s-length bargaining? On July 26, 2023, the parties participated in an arm’s-length mediation before David A. Rotman, which ultimately resulted in settlement. (Setareh Decl. ¶ 11.)

2. Were investigation and discovery sufficient to allow counsel and the court to act intelligently? Plaintiffs propounded Requests for Production of Documents, Special Interrogatories, and Form Interrogatories on Defendants with respect to the wage and hour claims and to identify time and payroll records. Plaintiffs hired an expert to analyze the data in preparation for mediation. Defendants provided payroll data for a random sample of 800 class members, which Plaintiffs’ expert reviewed. (See generally Setareh Decl. ¶¶ 9-11.)

3. Is counsel experienced in similar litigation? Yes. Class Counsel is experienced in class action litigation, including wage and hour class actions. (Setareh Decl. ¶¶ 4-6.)

4. What percentage of the class has objected? This cannot be determined until the fairness hearing. See Weil & Brown, Cal. Practice Guide: Civil Procedure Before Trial (The Rutter Group 2014) ¶ 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.”).

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

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

1. Strength of Plaintiff’s case. “The most important factor is the strength of the case for plaintiff on the merits, balanced against the amount offered in settlement.”  (Kullar v. Foot Locker Retail, Inc. (2008) 168 Cal.App.4th 116, 130.) Here, Defendant vigorously disputes all of Plaintiff’s claims. (See generally Mara Decl. ¶¶ 7-25.)

Here, Class Counsel has provided information, summarized below, regarding the estimated values of the class claims alleged:

(Setareh Decl. ¶ 11.)

            Once accounting for the risks of litigation, the realistic expected recovery would be significantly lower.

2. 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.

Here, some of the Class Members were subject to an arbitration agreement, which could have prevented the case from proceeding on a class basis. This factor appears significant, because any Class Members prevented from proceeding as a class would receive nothing. However, given the very small proportion of the settlement amount to the potential recovery, the Court requests that the parties clarify what portion of the Class Members are estimated to be subject to arbitration agreements with class action waivers.

3. Risk of maintaining class action status through trial. Even if a class is certified, there is always a risk of decertification. (See 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.”].)

4. Amount offered in settlement. Plaintiffs’ counsel estimated Defendants’ potential maximum recovery at $133,442,823.67. Plaintiffs’ counsel obtained a $3,500,000.00 non-reversionary settlement. This is approximately 2.6% of Plaintiffs’ potential maximum recovery.

The settlement amount, after reduced by the requested deductions, leaves approximately $2,093,333.33 to be divided among approximately 800 class members. Assuming full participation, the resulting payments will average approximately $2,616.67 per class member, before considering that non-DOT-regulated employees will receive twice the pro-rata rate of DOT-regulated employees.

5. Extent of discovery completed and stage of the proceedings. As indicated above, at the time of the settlement, Class Counsel had conducted sufficient discovery.

6.         Experience and views of counsel. The settlement was negotiated and endorsed by Class Counsel who, as indicated above, is experienced in class action litigation, including wage and hour class actions.

7. Presence of a governmental participant. LWDA has not participated in this action.

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, opt-out and/or submit claim forms. This factor becomes relevant during the fairness hearing.

            CONCLUSION:  Given the very small proportion of the settlement amount to the potential recovery, the Court requests that the parties clarify what portion of the Class Members are estimated to be subject to arbitration agreements with class action waivers. The Court requests this information before determining whether the settlement is adequate.

3. Scope of the release

Release by All Participating Class Members. All Class Members, including Plaintiff, shall be deemed to have released their respective Released Claims against the Released Parties. Plaintiffs and Class Members who do not Request Exclusion will be deemed to have fully, finally, and forever released, settled, compromised, relinquished, and discharged with respect to all of the Released Parties for any and all Released Claims that accrued during the Released Claims Period. (Settlement at pp. 6-7.)

·        “Released Claims” means all claims, known or unknown, that were alleged, or reasonably could have been alleged, based on the facts stated in the operative complaint, arising out of contract or out of California or federal wage-and-hour laws. This includes meal and rest period violations, record-keeping violations, expense reimbursements, PAGA penalties, and unfair competition (Settlement at pp. 6-7.)

·        “Released Parties” means Defendants and each of their past or

present officers, directors, shareholders, employees, agents, principals, heirs,

representatives, accountants, auditors, consultants, insurers and reinsurers, and its and their respective successors and predecessors in interest, subsidiaries, affiliates, parents and attorneys and each of their company-sponsored employee benefit plans and all of their respective officers, directors, employees, administrators, fiduciaries, trustees, and agents (Settlement at p. 6.) The released claims do not include claims for unemployment compensation, workers’ compensations, discrimination, or retaliation. (Settlement at p. 7.) The Class Members will be deemed to have waived Civil Code, section 1542.

·        Plaintiff additionally provides general release of his claims against Defendant. (Settlement at p. 8.)  Plaintiff provides a Civil Code, section 1542 waiver. (Settlement at pp. 8-9.)

4. May conditional class certification be granted?

1. 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 v. Ford Motor Co. (1996) 48 Cal.App.4^th 2794, 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 v. Apple Computer, Inc. (2001) 91 Cal.App.4^th 224, 240, disapproved on other grounds by Hernandez v. Restoration Hardware, Inc. (2018) 4 Cal.5^th 260.)

2. Analysis

a. Numerosity. The parties state and estimate that there are 800 class members.

b. Ascertainability. The proposed class is defined above. The class definition is “precise, objective and presently ascertainable.”  (Sevidal v. Target Corp. (2010) 189 Cal.App.4th 905, 919.) The class members are identifiable from Defendant’s records.

c. 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, Plaintiffs contend that the main issues involve the legality of Defendant’s employment policies regarding Plaintiff’s claims asserted in this action. Plaintiffs contend that their claims are typical of the class because they were hourly, non-exempt employees during the Class Period and were not paid for all work hours, were not provided compliant meal and rest breaks, and did not receive accurate wage statements. (Setareh Decl. ¶ 12.)

As to adequacy, Plaintiffs have adequate counsel, have no conflict of interest with the Class Members, and have agreed to place the interests of the Class Members above their own. (Setareh Decl. ¶ 12.)

d. Adequacy of class counsel. As indicated above, Class Counsel has shown experience in class action litigation, including wage and hour class actions.

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

            CONCLUSION:  The class may be conditionally certified since the prerequisites of class certification have been satisfied.

5. Is the notice proper?

1. Content of class notice.

The proposed notice is attached to the Settlement as Exhibit 1. Its content appears to be acceptable. It includes information such as: a summary of the litigation; the nature of the settlement; the terms of the settlement agreement; the proposed deductions from the gross settlement amount (attorney fees and costs, enhancement awards, and administration costs); the procedures and deadlines for participating in, opting out of, or objecting to, the settlement; the consequences of participating in, opting out of, or objecting to, the settlement; and the date, time, and place of the final approval hearing.

The notice is provided in English.

2. Method of class notice.

Within 45 calendar days of entry of the Preliminary Approval Order or receipt of the class data from Defendants, the Administrator shall mail out the Class Notice to the Class Members identified in the Class Data. (Settlement at pp. 16-17.).) Before sending the notices, the Administrator shall perform a search based on the National Change of Address Database maintained by the United States Postal Service to update and correct any known or identifiable address changes. (Ibid.)

Any Settlement Notice returned to the Administrator as non-deliverable on or before the Response Deadline shall be re-mailed to the forwarding address affixed thereto within 3 business days of receipt of the returned Settlement Notice by the Administrator. If no forwarding address is provided, the Administrator shall attempt to determine a correct address by using a single computer or other search using the social security number of the individual involved and shall forward the Notice to the correct address. The Administrator shall then re-mail the notice to the new Class Member addresses obtained. (Settlement at pp. 16-17.)

No less than 10 days before the final approval hearing, the Administrator will prepare a declaration stating (1) its mailing efforts regarding the class notice; (2) its receipt of valid requests for exclusion, and any inability to deliver the class notice to Class Members; and (3) the highest and lowest estimated individual settlement awards, along with the estimated average award. (Settlement at p. 19.)

Class Members shall have 30 days after the date the notice is first mailed to object or request exclusion. (Settlement at p. 17.) Class Members must submit a written objection in order to have a right to be heard at the final approval hearing. (Settlement at pp. 17-18.)

3. Cost of class notice.

As indicated above, settlement administration costs are estimated not to exceed $50,000.

6. 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.4th 1084, 1095-1096; Ramos v. Countrywide Home Loans, Inc. (2000) 82 Cal.App.4th 615, 625-626; Ketchum III v. Moses (2000) 24 Cal.4th 1122, 1132-1136.)  Despite any agreement by the parties to the contrary, “the court ha[s] 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.4th 123, 128.)

            The question of whether Class Counsel is entitled to $1,166,666.67 (33 1/3% of the Settlement Fund) in attorney fees will be addressed at the fairness hearing when class counsel brings a noticed motion for attorney fees. Class counsel must provide the court with billing information so that it can properly apply the lodestar method and must indicate what multiplier (if applicable) is being sought as to each counsel.   

            Class Counsel should also be prepared to justify the costs sought (capped at $50,000) by detailing how they were incurred.

7. Incentive Award

The Settlement Agreement provides for an enhancement award of up to $5,000 to each named Plaintiff. In connection with the final fairness hearing, named Plaintiffs each must submit a declaration attesting to why he or she should be entitled to an enhancement award in the proposed amount. The named Plaintiff must explain why he or she “should be compensated for the expense or risk she has incurred in conferring a benefit on other members of the class.”  (Clark v. American Residential Services LLC (2009) 175 Cal.App.4th 785, 806.) Trial courts should not sanction enhancement awards of thousands of dollars with “nothing more than pro forma claims as to ‘countless’ hours expended, ‘potential stigma’ and ‘potential risk.’ Significantly more specificity, in the form of quantification of time and effort expended on the litigation, and in the form of reasoned explanation of financial or other risks incurred by the named plaintiff, is required in order for the trial court to conclude that an enhancement was ‘necessary to induce [the named plaintiff] to participate in the suit . . . .’” (Id. at 806-807, italics and ellipsis in original.)

The Court will decide the issue of the enhancement awards at the time of final approval.