Judge: Michelle Williams Court, Case: 21STCV43188, Date: 2022-08-08 Tentative Ruling

Case Number: 21STCV43188    Hearing Date: August 8, 2022    Dept: 74

21STCV43188           MARIO HERRERA vs STONE ETC., INC., et al.

Plaintiff’s Motion for Preliminary Approval of Class Action Settlement is GRANTED.

The Court sets the following dates related to the settlement:

 

Defendants must provide the Class List to the Administrator within 10 business days of the preliminary approval.

 

The Administrator must serve notices to Class Members within 10 business days of receiving the Class List.

 

Members of the Settlement Class shall have 45 calendar days from the mailing of the Class Notice to object or opt out.

 

The Final Fairness and Final Approval Hearing is set for November 16, 2022 at 8:30 a.m..

 

Class Counsel shall file the Motion for Final Approval of Settlement and Motion for Attorney Fees (and respond to any objections) at least 16 court days prior to hearing.

 

Background

 

On November 23, 2021, Plaintiff Mario Herrera filed this PAGA only action against Defendants Stone Etc., Inc., G.B. Marble, Inc., and Giora Bareket alleging Defendants violated “Labor Code sections 201, 202, 204, 210, 221- 223, 226, 226.7, 510, 512, 1174, 1194, 1197, 1198, 1199, and all applicable Wage Orders.” (Compl. ¶ 8.)

 

On June 27, 2022, Plaintiff filed the instant motion for preliminary approval of class action settlement.

 

On June 29, 2022, the Court signed the parties’ stipulation and order granting leave to file a first amended class and representative action complaint. On June 30, 2022, Plaintiff filed the First Amended Complaint asserting causes of action for:

 

(1)   Unpaid Minimum Wages and Liquidated Damages – Labor Code §§ 1194 and 1194.2;

(2)   Unpaid Overtime – Labor Code § 1194;

(3)   Failure to Provide Meal Periods or Compensation in Lieu thereof – Labor Code § 226.7;

(4)   Failure to Provide Rest Periods or Compensation in Lieu thereof – Labor Code § 226.7;

(5)   Failure to Provide Accurate Itemized Wage Statements – Labor Code § 226;

(6)   Waiting Time Penalties – Labor Code §§ 201, et seq.;

(7)   Failure to Reimburse Expenses – Labor Code § 2802;

(8)   Violation of Unfair Competition Law – Bus. & Prof. Code §§ 17200, et seq.; and

(9)   Violation of Private Attorneys General Act – Labor Code §§ 2698, et seq.

On July 22, 2022, the Court issued an order requesting Plaintiff file additional documents by close of business on August 5, 2022.

 

Plaintiff filed the supplemental documents on July 26, 2022 and July 28, 2022.

 

Preliminary Approval of Class Action Settlement¿¿ 

 

As a “fiduciary” of the absent class members, the trial court’s duty is to have 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.4th¿1135, 1151 [citing¿Dunk v. Ford Motor Co. (1996) 48 Cal.App.4th 1794, 1801, 1802.)¿¿ 

 

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.4th¿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.4th 224, 244-45), 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, supra, 91 Cal.App.4th at 245, citing Dunk, supra, 48 Cal.App.4th 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, supra, 91 Cal.App.4th 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, citing Dunk, supra, 48 Cal.App.4th 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 Corp. (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.”].)   

 

Key Terms of the Settlement Agreement  

 

An executed copy of the Settlement Agreement is attached as Exhibit 1 to the Declaration of J. Kirk Donnelly.  

 

The class consists of “all individuals employed by Defendants in California as an hourly-paid, non-exempt employee during the Class Period.” (Donnelly Decl. Ex. 1, ¶ 6.) The Class Period is from “November 23, 2017 through July 16, 2022, inclusive.” (Id. at ¶ 8.) The PAGA period is September 19, 2020 to July 16, 2022.

 

The Gross Settlement Amount (“GSA”) is $335,000.00. (Id. ¶ 10.) Defendants shall separately pay employer-side payroll taxes and the settlement is non-reversionary. The Settlement Agreement divides the GSA as follows:

 

-        Up to $111,666.67 or 1/3 of the GSA in attorneys’ fees. (Id. at ¶¶ 3, 34.)

-        Up to $15,000.00 in costs and litigation expenses. (Ibid.)

-        Up to a $7,500.00 Enhancement Payment (Id. ¶ 35.)

-        Up to $15,000.00 in settlement administration fees. (Id. ¶ 36)

-        A $5,000.00 PAGA penalty with $3,750.00 going to the LWDA and $1,250.00 to be added to the Net Settlement Amount. (Id. ¶ 37.)

 

The settlement class consists of approximately 224 individuals. (Donnelly Decl. ¶ 12.) The Net Settlement Amount “will be divided as follows: forty percent (40%) will be allocated to class members who worked as slab installer or slab installer helper; fifty percent (50%) will be allocated to class members who worked as a tile installer or tile helper, and the remaining ten percent (10%) is allocated to class members who worked as fabricators/polishers, cutters, and yard personnel.” (Donnelly Decl. ¶ 14, Ex. 1, ¶ 38.) The individual settlement payments will be calculated as follows:  

 

Each allocation above shall be divided by the total number of Qualifying Workweeks of all individuals eligible to participate in the allocation. The result of this division is referred to as the “Weekly Rate;” and (b) the amount of each Class Member’s Individual Settlement Payment shall be the result of multiplying each Class Member’s number of Qualifying Workweeks by the applicable Weekly Rate.

 

(Donnelly Decl. Ex. 1 ¶ 38.) The average payment is approximately $812.00, but “will vary considerably depending on the job position held.” (Donnelly Decl. ¶ 15.)

 

“All Individual Settlement Payments will be allocated as follows: (i) one-third (1/3) of each Individual Settlement Payment will be allocated as wages for which IRS Forms W-2 will be issued; and (ii) two-thirds (2/3) will be allocated to expenses, penalties and interest for which IRS Forms 1099-MISC will be issued.” (Donnelly Decl. Ex. 1 ¶ 28)

 

CPT Group, Inc. will serve as the administrator. (Donnelly Decl. ¶ 16, Ex. 1 ¶ 31.)

 

Analysis of Settlement Agreement¿¿ 

 

A.    Does a Presumption of Fairness Exist?¿ 

 

1.¿Was the Settlement reached through arm’s-length bargaining?

 

Yes. The parties engaged in a full-day mediation on May 17, 2021 with mediator Deborah Saxe, Esq. (Donnelly Decl. ¶ 9.) “[T]he arms-length negotiations were hard-fought and adversarial as the Parties exchanged extensive information on their legal and factual positions, and made numerous offers and counter-offers.” (Ibid.) “With Ms. Saxe’s assistance, the Parties also agreed to include potential class claims in their settlement discussions, and ultimately agreed to settle potential class claims in addition to the PAGA claims.” (Id. ¶ 10.)

 

2.¿Were investigation and discovery sufficient to allow counsel and the Court to act intelligently?

 

Yes. “Plaintiff’s counsel reviewed payroll records, personnel policies/handbooks, meal break policies, personnel files, and a random sampling of paystubs and time records produced by Stone for about 25% of the class.” (Donnelly Decl. ¶ 8.) Defendants “provided documents and information reflecting the estimated total amount of workweeks and pay periods they worked, and average hourly pay rates, among other relevant data.” (Ibid.) Plaintiff had the data reviewed and analyzed by Berger Consulting Group to determine potential Labor Code violations and prepare a damages model. (Ibid.)

 

3. Is counsel experienced in similar litigation?

 

Yes. Plaintiff’s counsel has extensive experience litigating and settling employment class actions and PAGA cases. (Donnelly Decl. ¶¶ 36-38.)

 

4. What percentage of class has objected?

 

This will be determined at the final 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 Plaintiff’s 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, 168 Cal.App.4th¿at¿130). Plaintiff’s analysis calculated Defendant’s maximum liability as follows:

 

-        Unpaid Wages: $115,795;

-        Meal Period Violations: $249,500;

-        Rest Period Violations: $249,500;

-        Expense Reimbursement: $86,290;

-        Wage Statement Violations: $225,950 in civil penalties; and

-        Waiting Time Penalties: $488,400 in civil penalties.

 

(Donnelly Decl. ¶ 28.) Defendant’s maximum liability exposure was therefore approximately $1,415,445.00. (Ibid.) Plaintiff calculates the total PAGA exposure, if penalties were awarded in full for each violation to be $1,200,000.00. (Id. ¶ 33.) Plaintiff notes the Defendants’ potential arguments and defenses, including arguments against class certification, their facially compliant meal and rest break policies, claims of waiver, the locations of employees’ job sites, and the asserted lack of necessity for the claimed business expenses. (Id. ¶¶ 29-33.)

 

The Court concludes that the GSA and the apportioned PAGA settlement amount appear appropriate considering the strength of Plaintiffs’ case on the merits.

 

2.     Risk, expense, complexity and likely duration of further litigation.

 

Further litigation carried the possibility of lengthy, expensive discovery and motion practice, possible non-certification, and the difficulty, expense, and uncertainty of proving damages. (Donnelly Decl. ¶ 34.)  

 

3.     Risk of maintaining class action status through trial.

 

Plaintiff would bear the burden to maintain the class action status through the trial. Plaintiff notes the potential hurdles to certification in a contested setting, the probability of a motion to decertify as well as possible appeals if the case went to trial. (Ibid.)

 

4.     Amount offered in settlement.

 

As indicated above, Defendants have offered to pay a total of $335,000.00 for the settlement of this action. Based upon the proposed reductions of $111,666.67 in attorneys’ fees, $15,000.00 in costs and litigation expenses, $7,500.00 for an enhancement payment, $15,000.00 in settlement administration fees, and $5,000.00 for a PAGA penalty, the Net Settlement Amount available to the Class for the Class Claims is $180,833.33. The average payment is approximately $812.00, but “will vary considerably depending on the job position held.” (Donnelly Decl. ¶ 15.)

 

The settlement provides that Defendants will fund the settlement in three installments, with the last installment being paid 360 days after the first payment. (Donnelly Decl. Ex. 1 ¶ 33.)

 

In response to the Court’s order, Plaintiff provided the declaration of Gary Bareket, the president of Stone Etc., Inc./G.B. Marble. Bareket attests a payment plan is necessary due to the financial hardships faced by Defendants’ business. (Bareket Decl. ¶ 4.) Bareket states there has been a 60% reduction in sales, significant losses in 2021, and the company “continues to struggle in 2022 and is barely breaking even.” (Ibid.) Bareket indicates the payment plan “will allow the company to continue paying payroll timely and without interruptions.” (Ibid.)

 

5.     Extent of discovery completed and the stage of the proceedings.

 

As stated above, it appears that Plaintiff completed sufficient discovery to make an informed decision regarding the settlement.

 

6.     Experience and views of counsel.

 

As stated above, Class Counsel has extensive experience in labor and employment class actions.¿ 

 

7.     Presence of a governmental participant.

 

The LWDA has not filed an objection to the settlement. ¿ 

 

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¿ 

 

Release of Claims¿¿ 

Under the settlement, “‘Released Claims’ means any and all class claims that were asserted in the operative First Amended Class and Representative Action Complaint or that could have been asserted based on the allegations made in the operative First Amended Class and Representative Action Complaint, for the duration of the Class Period. As to claims under PAGA, the Released Claims include any and all claims for civil penalties under PAGA asserted in the PAGA Notice filed with the LWDA, or claims for civil penalties under PAGA that arise based on the allegations in the PAGA Notice filed with the LWDA, for the duration of the PAGA period of September 19, 2020 to July 16, 2022. The Released Claims do not include any claims that cannot be released as a matter of law.” (Donnelly Decl. Ex. 1 ¶ 26.) The Court finds the scope of release to be permissible because it is limited to claims arising from the facts alleged in the First Amended Complaint and the PAGA notice.

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, supra,¿48 Cal.App.4th at 1807 n.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.4th¿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, supra, 91 Cal.App.4th ¿at 240.)¿ 

 

B.¿ Analysis¿ 

 

1.¿Numerosity.

 

There are approximately 224 individual Class Members, which is sufficiently numerous. (Donnelly Decl. ¶ 12.) “No 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), and classes with as few as ten members have been certified. (See Collins v. Rocha (1972) 7 Cal.3d 232 (class of 9 named plaintiffs on behalf of 35 others); Bowles v. Superior Court (1955) 44 Cal.2d 574 (class of 10 trust beneficiaries).)

 

2.¿Ascertainability.¿

 

The class definition “is precise, objective and presently ascertainable.” (Sevidal¿v. Target Corp.¿(2010) 189 Cal.App.4th 905, 919.) Class Members are identifiable from Defendants records. (Donnelly Decl. ¶ 22; Ex. 1 ¶ 5.) 

 

  1. 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.) 

 

The first factor is met because the Class Members “all were subject to the same meal rest break policies, the same alleged rounding policy that shorted them on hours worked, and the same expense reimbursement policies.” (Mot. at 9:13-22; Donnelly Decl. ¶ 24. See Williams v. Superior Court (2013) 221 Cal.App.4th 1353, 1369 (“A companywide practice can sustain a common question of fact or law that supports commonality for class certification.”).)

 

The second factor is met because class representative has claims typical of the class, as his claims are based on the same legal theories and arise out of the same allegedly unlawful policies and practices.  

 

The third factor is met because the named Plaintiff’s interests do not conflict with the members of the class and his claims are typical of the class because they arise out of the same commonly applied employment practices. (Donnelly Decl. ¶ 23; Herrera Decl. ¶¶ 2-8.)

 

  1. Adequacy of class counsel.

 

As indicated above, counsel is experienced in class actions, including cases involving wage and hour violations.  

 

  1. Superiority.

 

Superiority is generally determined according to four factors: (1) each member’s interest in controlling their own case; (2) the existence of manageability issues; (3) the extent of overlapping, pending individual litigation; and (4) the desirability of consolidating all claims for joint resolution before one court. (Ali v. U.S.A. Cab Ltd. (2009) 176 Cal.App.4th 1333, 1353; Basurco v. 21st Century Insurance Co. (2003) 108 Cal.App.4th 110, 121.)

 

Class resolution of the claims asserted is superior to individual suits as there are approximately 224 class members asserting claims arising out of common employment practices. It is desirable and efficient to resolve their claims in a single forum.

 

The elements of class certification have been met and the class is conditionally certified as all individuals employed by Defendants in California as an hourly-paid, non-exempt employee between November 23, 2017 through July 16, 2022, inclusive.

 

Notice to Class 

 

A. Standard 

 

California Rules of Court, rule 3.769(e) provides: “[i]f 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: “[i]f 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 class notice exemplar is attached to the Settlement Agreement as Exhibit A. (Donnelly Decl. Ex. 1.) The notice contains a definition of the class, a discussion of the litigation and the terms of the settlement, the different options for responding to the notice, and information about when and where the fairness hearing will be held. Class members are also informed about the attorneys’ fees and other deductions that will be requested from the settlement fund, and it identifies the name and contact information for Plaintiff’s counsel. The notice clearly explains how individual settlement payments are calculated and includes an estimate of the class member’s payment. The notice also includes the tax allocations of the settlement, the check cashing deadline, and where uncashed checks will be directed.

 

In response to the Court’s order, Plaintiff amended Section 8 of the Notice to contain the verbatim, full definitions of “Released Claims” and “Released Parties” as stated in the settlement agreement and corrected the numeric inconsistency in the last paragraph of section 6 of the Class Notice.

 

C. Method of Notice 

Within 10 business days of preliminary approval, Defendants will provide the Class List to the Settlement Administrator. (Donnelly Decl. Ex. 1 ¶ 43.) “The Class List will be formatted in Microsoft Office Excel and will include each Class Member’s full name; most recent mailing address and telephone number; Social Security Number; and dates of employment.” (Id. ¶ 5.) Within 10 business days of receiving the Class List, the Settlement Administrator will mail the Class Notice to all Class Members via First-Class U.S. Mail. (Id. ¶ 44.) The Settlement Administrator will perform a search on the National Change of Address Database to update and correct the addresses as needed. (Id. ¶ 45.) The Settlement Administrator will either re-mail undeliverable notices to the stated forwarding address or conduct a skip-trace search to perform a single remailing. (Ibid.)

Attorney Fees, Costs, and Incentive Awards

 

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.” 

 

An award of attorney fees is made by the Court at the fairness hearing. (Laffitte v. Robert Half Intern., Inc. (2016) 1 Cal.5th 480.) 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 Co. (2004) 118 Cal.App.4th 123, 128.) Incentive awards are also addressed at the final fairness hearing based upon Plaintiff’s declaration. (See e.g. Clark v. American Residential Services LLC (2009) 175 Cal.App.4th 785, 806.)

 

Accordingly, the question of whether class counsel is entitled to $111,666.67 in attorneys’ fees will be addressed at the fairness hearing when class counsel brings a noticed motion for attorney fees. With the motion, counsel must provide an overall summary of the time spent by each attorney or paralegal who worked on this matter. (Laffitte, supra, 1 Cal.5th at 505 (“The trial court in the present case exercised its discretion in this manner, performing the cross-check using counsel declarations summarizing overall time spent, rather than demanding and scrutinizing daily time sheets in which the work performed was broken down by individual task.”).) 

 

Furthermore, any agreement about how attorney fees will be paid, including fee splitting and whether the client has given written approval, should be provided. (Mark v. Spencer (2008) 166 Cal.App.4th 219; Cal. R. Ct., rule 3.769(b).)