1 2 3 4 5 6 7 8 UNITED STATES DISTRICT COURT 9 SOUTHERN DISTRICT OF CALIFORNIA 10 11 LAVERNA SHANNON, individually and Case No. 19-cv-01101-BAS-JLB on behalf of other employees similarly 12 situated and in a representative capacity, ORDER GRANTING PLAINTIFF’S 13 MOTION FOR PRELIMINARY Plaintiff, APPROVAL OF CLASS ACTION 14 v. SETTLEMENT (ECF No. 13) 15 SHERWOOD MANAGEMENT CO., 16 INC., 17 Defendant. 18 19 Plaintiff Laverna Shannon filed this employment class action against Defendant 20 Sherwood Management Co., Inc. Now before the Court is Plaintiff’s motion for 21 preliminary approval of the parties’ settlement. (ECF No. 13.) The Court finds this motion 22 suitable for determination on the papers submitted and without oral argument. See Fed. R. 23 Civ. P. 78(b); Civ. L.R. 7.1(d)(1). For the following reasons, the Court GRANTS 24 Plaintiff’s motion for preliminary approval. 25 I. Jurisdiction 26 Before addressing Plaintiff’s motion, the Court considers its jurisdiction. On 27 February 8, 2019, Plaintiff filed her Complaint in San Diego County Superior Court. 1 (Compl., Notice of Removal Ex. B, ECF No. 1-3.) After exhausting the notice 2 requirements under California’s Private Attorneys General Act (“PAGA”),1 Plaintiff filed 3 a First Amended Complaint on April 15, 2019. (First Am. Compl., Notice of Removal Ex. 4 A, ECF No. 1-2.) 5 Plaintiff alleges Defendant does business as Daniel’s Jewelers and has more than 6 100 retail stores in California. (First Am. Compl. ¶ 7.) Plaintiff worked for Defendant as 7 a non-exempt employee in a sales position. (Id. ¶¶ 20–21.) She brings ten wage-and-hour 8 claims against Defendant, including claims regarding vacation wages, paid sick time, and 9 accurate wage statements. (Id. ¶¶ 56–138.) Plaintiff also brings eleven claims under 10 PAGA based on various purported violations of the California Labor Code. (Id. ¶¶ 139– 11 239.) 12 On June 12, 2019, Defendant removed this action under the Class Action Fairness 13 Act (“CAFA”), 28 U.S.C. § 1332(d). (Notice of Removal, ECF No. 1.) In its Notice of 14 Removal, Defendant alleges the amount in controversy is at least $5,200,000. (Id. ¶¶ 24– 15 25, 27–28.) To reach this valuation, Defendant assumes the First Amended Complaint 16 alleges Defendant violated the law 100% of the time for several of Plaintiff’s employment 17 claims. (See id.) 18 On July 15, 2019, Plaintiff filed a motion to remand that challenged Defendant’s 19 assertion of jurisdiction, particularly the alleged amount in controversy. (ECF No. 7.)2 20 1 PAGA permits an “aggrieved employee” to “bring a civil action personally and on behalf of 21 other current or former employees to recover civil penalties for Labor Code violations.” Arias v. Superior 22 Court, 46 Cal. 4th 969, 980 (2009) (citing Cal. Labor Code § 2699(a)). Before filing a PAGA action, the employee must provide notice of the alleged violations to both the employer and California’s Workforce 23 Development Agency. Cal. Labor Code § 2699(b). If the agency notifies the employee that it does not intend to investigate—or it fails to respond within a set period—the employee may bring a civil action. 24 Id. § 2699.3(a), (a)(2)(A). 2 In addition, Defendant moved to dismiss or strike Plaintiff’s First Amended Complaint. (ECF 25 No. 5.) The parties asked the Court to analyze Plaintiff’s motion to remand before Defendant’s pleadings 26 challenge. (ECF No. 4.) Therefore, the Court terminated Defendant’s motion and specified that Defendant’s deadline to respond to the First Amended Complaint would be fourteen days after an order 27 is entered on the remand motion. (ECF No. 6.) 1 The parties later asked the Court to continue Plaintiff’s motion to allow them to attend 2 mediation. (ECF No. 8.) The Court granted the request. (ECF No. 9.) And on September 3 6, 2019, the parties filed a notice of settlement, leading the Court to terminate the remand 4 motion. (ECF Nos. 10, 11.) Plaintiff later filed her preliminary approval motion on 5 November 6, 2019. (ECF No. 13.) 6 Although the Court terminated Plaintiff’s remand motion in light of the parties’ 7 settlement, “district courts have an ‘independent obligation to address subject-matter 8 jurisdiction.’” Grupo Dataflux v. Atlas Global Grp., L.P., 541 U.S. 567, 593 9 (2004) (quoting United States v. S. Cal. Edison Co., 300 F. Supp. 2d 964, 972 (E.D. Cal. 10 2004)). Therefore, in January 2020, the Court issued an Order to Show Cause (“OSC”) 11 that addressed Defendant’s Notice of Removal. (OSC, ECF No. 16.) The OSC reviewed 12 CAFA’s jurisdictional requirements and then focused on whether Defendant sufficiently 13 alleges that the amount in controversy meets CAFA’s $5 million threshold. (Id. 3 (citing 14 28 U.S.C. § 1332(d); Ibarra v. Manheim Invs., Inc., 775 F.3d 1193, 1195 (9th Cir. 2015)).) 15 In assessing Defendant’s allegations, the Court noted that in employment cases the 16 Ninth Circuit “has paid particular attention to the violation rates used by defendants to 17 establish the required amount in controversy under CAFA.” (OSC 3 (citing Ibarra, 775 18 F.3d at 1198–99).) For instance, in Ibarra v. Manheim Investments, Inc., the Ninth Circuit 19 held that a complaint alleging only “a ‘pattern and practice’ of labor law violations” did 20 not support an amount in controversy calculation based on a universal or 100% violation 21 rate. 775 F.3d at 1199 & n.3. Further, the Ninth Circuit stated in an unpublished opinion 22 that the use of language such as “at all relevant times” does not equate to “a 100% violation 23 rate.” Branch v. PM Realty Group, L.P., 647 Fed. App’x 743, 746 n.7 (9th Cir. 2016). 24 Several district courts in California have also expressed distaste for allegations of a 100% 25 violation rate. See, e.g., Dobbs v. Wood Grp. PSN, Inc., 201 F. Supp. 3d 1184, 1184 (E.D. 26 Cal. 2016); Cummings v. G6 Hosp. LLC, No. 19-cv-00122-GPC-LL, 2019 WL 1455800, 27 1 at *2 (S.D. Cal. Apr. 2, 2019); Moreno v. Ignite Rest. Grp., No. C 13-05091 SI, 2014 WL 2 1154063, at *5 (N.D. Cal. Mar. 20, 2014). 3 Although Defendant’s removal allegations appear to rely upon a 100% violation rate, 4 the Court construed Plaintiff’s pleading to allege a “pattern and practice” of violations; 5 meaning, the purported labor violations did not occur during every one of an employee’s 6 shifts. (OSC 4 (citing First Am. Compl. ¶¶ 51–52, 80, 91, 129).) Defendant’s reliance on 7 a 100% violation rate, however, yielded a sum only $200,000 greater than the jurisdictional 8 minimum of $5 million. (See Notice of Removal ¶¶ 24, 25, 27, 28.) Therefore, even if the 9 Court were to assume a high violation rate for Plaintiff’s pattern and practice allegations— 10 such as 60%—the Court reasoned Defendant’s jurisdictional allegations “fall well short of 11 the jurisdictionally required amount.” (OSC 5 (citing 28 U.S.C. § 1332(d); Cavada v. 12 Inter-Continental Hotels Grp., No. 19-cv-1675-GPC(BLM), 2019 WL 5677846, at *4 13 (S.D. Cal. Nov. 1, 2019)).) The Court thus reasoned Defendant “has failed to meet its 14 burden of establishing this Court’s jurisdiction under 28 U.S.C. § 1332(d)” and ordered 15 Defendant “to show cause as to why this action should not be remanded for lack of subject 16 matter jurisdiction.” (Id.) 17 In a detailed response filed February 10, 2020, Defendant argues the amount in 18 controversy requirement is satisfied, even assuming a lower violation rate. (ECF No. 17.) 19 Defendant provides a thorough analysis of four of Plaintiff’s twenty-one causes of action, 20 indicating the amount in controversy easily exceeds $5 million. (Id. at 6–9.) Defendant 21 also submits a declaration from its Chief Operating Officer that supports Defendant’s 22 response by detailing the number of Defendant’s employees, their shift count, and their 23 average pay rates for the relevant period. (Ronci Decl. ¶¶ 3–6, ECF No. 17-1.) Finally, 24 Defendant submits a proposed Amended Notice of Removal, which augments Defendant’s 25 jurisdictional allegations based on its response to the Court’s OSC. (ECF No. 17-2.) 26 27 1 Having reviewed Defendant’s response and its revised liability calculations, the 2 Court is persuaded that the amount in controversy exceeded $5 million at the time of 3 removal. The Court also finds permitting Defendant to amend its Notice of Removal is 4 appropriate. The proposed Amended Notice does not add a new basis for jurisdiction; it 5 clarifies “‘defective’ allegations of jurisdiction previously made” regarding the amount in 6 controversy. See Prado v. Dart Container Corp. of Cal., 373 F. Supp. 3d 1281, 1287 (N.D. 7 Cal. 2019) (quoting Barrow Dev. Co. v. Fulton Ins. Co., 418 F.2d 316, 317 (9th Cir. 1969)); 8 see also 14C Wright & Miller, Federal Practice and Procedure § 3733 (Rev. 4th ed., April 9 2020 update) (explaining that a notice of removal may be amended outside the thirty-day 10 removal period “to set out more specifically the grounds for removal that already have been 11 stated in the original notice,” including to “clarify the jurisdictional amount”). 12 In sum, Defendant’s response to the Court’s OSC persuasively demonstrates that 13 CAFA’s amount in controversy requirement is satisfied. The Court concludes it has subject 14 matter jurisdiction and will direct Defendant to file its proposed Amended Notice of 15 Removal. 16 II. Preliminary Approval 17 A. Proposed Settlement 18 Having confirmed jurisdiction exists, the Court turns to Plaintiff’s request for 19 preliminary approval of the parties’ class action settlement. Soon after removal, the parties 20 began considering mediation. (Richard Decl. ¶ 8, ECF No. 13-2.) To prepare for 21 mediation, they exchanged documents and data, including detailed statistical data about the 22 putative class, policy and procedure documents, and employee compensation information. 23 (Id. ¶ 13.) The parties participated in a full-day mediation on August 23, 2019, where they 24 reached a settlement after receiving a mediator’s proposal. (Id. ¶ 14.) The parties then 25 finalized their Joint Stipulation of Class Action Settlement and Release (“Settlement 26 27 1 Agreement”). (Id.; see also Settlement Agreement, Richard Decl. ¶ 1, Ex. 1, ECF No. 13- 2 3.)3 3 Settlement Class. As set forth in the Settlement Agreement, the Settlement applies 4 to a Class defined as “all exempt and non-exempt current and former employees of 5 [Defendant] who worked in California at any point during the period of February 8, 2015 6 to August 23, 2019.” (Settlement Agreement § 1.) The parties estimate there are 2,150 7 Class Members. (Id. Recitals.) 8 Settlement Fund. To settle the Class Members’ claims, Defendant agrees to deposit 9 $450,000 into a non-reversionary, common fund. (Settlement Agreement § 8.) This 10 Settlement Fund will be distributed as follows: 11 (a) a minimum of $250,000 for payments to Settlement Members, of which 20% 12 shall for tax purposes be deemed wages subject to Form W-2 reporting, and 13 80% shall for tax purposes be deemed non-wages; 14 (b) a maximum of $135,000 (30% of the Settlement Amount) for the payment of 15 Class Counsel’s Attorney Fees; 16 (c) a maximum of $20,000 for the payment of Class Counsel’s Costs; 17 (d) $22,500 to the State of California for its share of the Settlement Amount 18 allocated for settlement of the PAGA claims; 19 (e) a maximum of $2,500 for the payment of a Class Representative Service 20 Payment to the named Plaintiff; and 21 (f) a maximum of $20,000 for Settlement Administration Costs. 22 (Id. § 8.) If the Court approves less than the maximum amounts specified in items (b)–(f), 23 “the unapproved and awarded sums shall be added to the Class Recovery” and shall not 24 “revert to Defendant.” (Id.) Defendant has also agreed to separately pay the employer- 25 26 3 Capitalized terms used in this order but not defined herein have the meanings ascribed to them 27 in the Settlement Agreement. 1 side “payroll taxes due upon payment of the 20% allocated to wages payable to Settlement 2 Class Members.” (Id.) 3 The Class Recovery will be apportioned among the Settlement Members based on 4 the number of pay periods each individual worked during the Class Period. (Settlement 5 Agreement § 32.) Hence, assuming the Class Recovery is $250,000, the average recovery 6 per class member will be $116.28, although this amount will presumably vary significantly 7 based on an individual’s work history during the Class Period. (See id. §§ 8, 32.) Class 8 Members will not have to submit a claim to participate in the Settlement. (Id. § 34(d).) 9 Class Notice. To provide notice of the Settlement, Defendant will compile a list of 10 all Class Members from its records, including the number of pay periods each Class 11 Member worked for Defendant. (Settlement Agreement § 4.) Defendant will then provide 12 this list to the Settlement Administrator, who will mail a Notice Packet to all Class 13 Members via regular First-Class U.S. Mail, “using the most current, known mailing 14 addresses identified in the Class List or through a National Change of Address database 15 search.” (Id. § 23.) “For any . . . envelopes [returned] from this mailing as non-deliverable 16 on or before 30 days after mailing, the Settlement Administrator will use any forwarding 17 address provided to re-mail the returned envelope and, if no forwarding address is 18 provided, will perform a skip trace to identify an address to which the envelope may be 19 forwarded.” (Id.) 20 Right to Opt Out or Object and Release. Class Members will have forty-five days 21 after the mailing of the Notice Packets to opt out of the Settlement. (Settlement Agreement 22 §§ 6, 24.) Class Members may do so by submitting a Request for Exclusion to the 23 Settlement Administrator. (Id. § 24.) Further, a Settlement Member may object to the 24 Settlement within the same time period. (Id. § 25.) 25 Those Class Members who do not timely opt out of the Settlement will be bound by 26 all the terms of the Settlement. (Settlement Agreement § 24.) Further, upon final approval, 27 1 all Settlement Members fully release the claims raised against Defendant in the First 2 Amended Complaint “for the time period of February 8, 2015 through August 23, 2019,” 3 including “any claims that could have arisen from the facts and circumstances alleged in” 4 this case. (Id. § 16.) This release also applies to “any claim under the Fair Labor Standards 5 Act (‘FLSA’)” that could have arisen from the relevant facts and circumstances. (Id.) 6 B. Legal Standard 7 The Ninth Circuit maintains a “strong judicial policy” that favors the settlement of 8 class actions. Class Plaintiffs v. City of Seattle, 955 F.2d 1268, 1276 (9th Cir. 1992). 9 Nonetheless, a class action may not be settled without court approval. Fed. R. Civ. P. 10 23(e). When the parties to a putative class action reach a settlement prior to class 11 certification, “courts must peruse the proposed compromise to ratify both the propriety of 12 the certification and the fairness of the settlement.” Staton v. Boeing Co., 327 F.3d 938, 13 952 (9th Cir. 2003). 14 Courts generally employ a two-step process in evaluating a class action settlement. 15 First, the court must assess whether a class exists. Staton, 327 F.3d at 952 (citing Amchem 16 Prods. Inc. v. Windsor, 521 U.S. 591, 620 (1997)). This inquiry “is of vital importance, 17 for a court asked to certify a settlement class will lack the opportunity, present when a case 18 is litigated, to adjust the class, informed by the proceedings as they unfold.” Id. Second, 19 the court must determine “whether a proposed settlement is fundamentally fair, adequate, 20 and reasonable,” recognizing that “[i]t is the settlement taken as a whole, rather than the 21 individual component parts, that must be examined for overall fairness.” Hanlon v. 22 Chrysler Corp., 150 F.3d 1011, 1026 (9th Cir. 1998). Where the parties reach a settlement 23 prior to class certification, courts apply “‘a higher standard of fairness’ and ‘a more probing 24 inquiry than may normally be required under Rule 23(e).’” Dennis v. Kellogg Co., 697 25 F.3d 858, 864 (9th Cir. 2012) (quoting Hanlon, 150 F.3d at 1026). 26 27 1 The court’s task at the preliminary approval stage is to determine whether the 2 settlement falls “within the range of possible approval.” In re Tableware Antitrust Litig., 3 484 F. Supp. 2d 1078, 1080 (N.D. Cal. 2007) (quoting Schwartz v. Dallas Cowboys 4 Football Club, Ltd., 157 F. Supp. 2d 561, 570 n.12 (E.D. Pa. 2001)). Preliminary approval 5 is appropriate if “the proposed settlement appears to be the product of serious, informed, 6 non-collusive negotiations, has no obvious deficiencies, does not improperly grant 7 preferential treatment to class representatives or segments of the class, and falls within the 8 range of possible approval.” Id. at 1079. “The initial decision to approve or reject a 9 settlement proposal is committed to the sound discretion of the trial judge.” Class 10 Plaintiffs, 955 F.2d at 1276 (quoting Officers for Justice v. Civil Serv. Comm’n, 688 F.2d 11 615, 625 (9th Cir. 1982)). 12 C. Analysis 13 1. Class Certification 14 The class action is “an exception to the usual rule that litigation is conducted by and 15 on behalf of the individual named parties only.” Wal-Mart Stores, Inc. v. Dukes, 564 U.S. 16 338, 348 (2011) (quoting Califano v. Yamasaki, 442 U.S. 682, 700–01 (1979)). To justify 17 a departure from that rule, “a class representative must be part of the class and ‘possess the 18 same interest and suffer the same injury’ as the class members.” Id. (citing E. Tex. Motor 19 Freight Sys., Inc. v. Rodriguez, 431 U.S. 395, 403 (1977)). In this regard, Rule 23 contains 20 two sets of class-certification requirements set forth in Rule 23(a) and (b). United Steel, 21 Paper & Forestry, Rubber, Mfg. Energy, Allied Indus. & Serv. Workers Int’l Union v. 22 ConocoPhillips Co., 593 F.3d 802, 806 (9th Cir. 2010). “A court may certify a class if a 23 plaintiff demonstrates that all of the prerequisites of Rule 23(a) have been met, and that at 24 least one of the requirements of Rule 23(b) have been met.” Otsuka v. Polo Ralph Lauren 25 Corp., 251 F.R.D. 439, 443 (N.D. Cal. 2008). 26 27 1 “Rule 23(a) provides four prerequisites that must be satisfied for class certification: 2 (1) the class must be so numerous that joinder of all members is impracticable; 3 (2) questions of law or fact exist that are common to the class; (3) the claims or defenses 4 of the representative parties are typical of the claims or defenses of the class; and (4) the 5 representative parties will fairly and adequately protect the interests of the class.” Otsuka, 6 251 F.R.D. at 443 (citing Fed. R. Civ. P. 23(a)). “A plaintiff must also establish that one 7 or more of the grounds for maintaining the suit are met under Rule 23(b), including: (1) that 8 there is a risk of substantial prejudice from separate actions; (2) that declaratory or 9 injunctive relief benefitting the class as a whole would be appropriate; or (3) that common 10 questions of law or fact predominate and the class action is superior to other available 11 methods of adjudication.” Id. (citing Fed. R. Civ. P. 23(b)). 12 “These factors must be considered in light of the reason for which certification is 13 sought—litigation or settlement—which ‘is relevant to a class certification.’” In re 14 Hyundai & Kia Fuel Econ. Litig., 926 F.3d 539, 558 (9th Cir. 2019) (en banc) (quoting 15 Amchem, 521 U.S. at 619). Hence, “in deciding whether to certify a settlement-only class, 16 ‘a district court need not inquire whether the case, if tried, would present intractable 17 management problems.’” Id. (quoting Amchem, 521 U.S. at 620). 18 i. Numerosity – Rule 23(a)(1) 19 Rule 23(a)(1) requires that the class be “so numerous that joinder of all members is 20 impracticable.” Fed. R. Civ. P. 23(a)(1). “[C]ourts generally find that the numerosity 21 factor is satisfied if the class comprises 40 or more members and will find that it has not 22 been satisfied when the class comprises 21 or fewer.” Celano v. Marriott Int’l, Inc., 242 23 F.R.D. 544, 549 (N.D. Cal. 2007). As mentioned, the proposed settlement class consists 24 of approximately 2,050 current and former employees of Defendant. The Court therefore 25 finds joinder of all class members is impracticable for the purposes of Rule 23(a)(1) and 26 the numerosity requirement is satisfied. See id. 27 1 ii. Commonality – Rule 23(a)(2) 2 Under Rule 23(a)(2), the named plaintiff must demonstrate that there are “questions 3 of law or fact common to the class.” Fed. R. Civ. P. 23(a)(2). “Commonality requires the 4 plaintiff to demonstrate that the class members ‘have suffered the same injury[.]’” Dukes, 5 564 U.S. at 349–50 (quoting Gen. Tel. Co. of Sw. v. Falcon, 457 U.S. 147, 157 (1982)). 6 However, “[a]ll questions of fact and law need not be common to satisfy this rule.” Hanlon, 7 150 F.3d at 1019. “The existence of shared legal issues with divergent factual predicates 8 is sufficient, as is a common core of salient facts coupled with disparate legal remedies 9 within the class.” Id. 10 Plaintiff’s First Amended Complaint identifies a panoply of alleged labor violations. 11 She identifies several examples of common issues of fact and law in her preliminary 12 approval motion: 13 (1) whether Defendant’s itemized wage statements issued to Plaintiff and Class Members omitted or misreported information required by Labor Code 14 § 226(a), and whether that failure resulted in injury as that requirement is 15 defined under § 226(e);
16 (2) whether Defendant had a policy of not providing meal periods to Class 17 Members in conformance with California law as evidenced by Defendant’s payment of extra compensation under California Labor Code § 226.7, and 18 whether civil penalties are available despite the § 226.7 payment; 19 (3) whether the regular rate of compensation owed under California Labor 20 Code § 226.7 should account for payments of remuneration beyond the base 21 hourly rate of pay (i.e. commission and bonus compensation); and
22 (4) whether there may be time-of-use restrictions on paid vacation and sick 23 leave. 24 (Mot. 16–17.) As these examples illustrate, there are common questions of law concerning 25 whether certain California Labor Code provisions were violated, including whether 26 statutory remedies and penalties are available. Further, there are common questions of fact 27 1 concerning Defendant’s policies, wage statements, and other employment issues. 2 Accordingly, the Court finds the commonality requirement is satisfied for the proposed 3 settlement class. 4 iii. Typicality – Rule 23(a)(3) 5 To satisfy Rule 23(a)(3), the named plaintiff’s claims must be typical of the claims 6 of the class. Fed. R. Civ. P. 23(a)(3). The typicality requirement is “permissive” and 7 requires only that the named plaintiff’s claims “are reasonably co-extensive with those of 8 absent class members.” Hanlon, 150 F.3d at 1020. “The test of typicality ‘is whether other 9 members have the same or similar injury, whether the action is based on conduct which is 10 not unique to the named plaintiffs, and whether other class members have been injured by 11 the same course of conduct.’” Hanon v. Dataproducts Corp., 976 F.2d 497, 508 (9th Cir. 12 1992) (quoting Schwartz v. Harp, 108 F.R.D. 279, 282 (C.D. Cal. 1985)). “[C]lass 13 certification should not be granted if ‘there is a danger that absent class members will suffer 14 if their representative is preoccupied with defenses unique to it.’” Id. (quoting Gary Plastic 15 Packaging Corp. v. Merrill Lynch, Pierce, Fenner & Smith, Inc., 903 F.2d 176, 180 (2d 16 Cir. 1990)). 17 Plaintiff is a member of the proposed Class because she worked for Defendant during 18 the relevant period. (See Shannon Decl. ¶¶ 1–2, ECF No. 13-4.) Hence, she was subject 19 to the employment practices and policies that are the subject matter of this case, such as 20 Defendant’s allegedly inaccurate wage statements and purportedly improper restrictions 21 on vacation and sick pay. There is no indication that Plaintiff’s claims are unique to her or 22 that Plaintiff’s claims are subject to unique defenses. Therefore, the Court finds the 23 typicality requirement is satisfied. 24 iv. Adequacy – Rule 23(a)(4) 25 Rule 23(a)(4) requires that the representative plaintiff “will fairly and adequately 26 protect the interest of the class.” Fed. R. Civ. P. 23(a)(4). “To satisfy constitutional due 27 1 process concerns, absent class members must be afforded adequate representation before 2 entry of a judgment which binds them.” Hanlon, 150 F.3d at 1020 (citing Hansberry v. 3 Lee, 311 U.S. 32, 42–43 (1940)). “Resolution of two questions determines legal adequacy: 4 (1) do the named plaintiffs and their counsel have any conflicts of interest with other class 5 members and (2) will the named plaintiffs and their counsel prosecute the action vigorously 6 on behalf of the class?” Id. (citing Lerwill v. Inflight Motion Pictures, Inc., 582 F.2d 507, 7 512 (9th Cir. 1978)). 8 Here, Plaintiff has participated in Class Counsel’s investigation of the class-wide 9 claims, has engaged in discussions with Class Counsel, has participated in the mediation, 10 and has been educated on the nature of class action litigation and the duties and 11 responsibilities of being a class representative. (Richard ¶ 26; Shannon Decl. ¶¶ 3–5.) She 12 also has chosen competent and experienced counsel, who documents the efforts to 13 vigorously prosecute this case. (Richard Decl. ¶¶ 2–25.) There is no indication that 14 Plaintiff or her counsel has a conflict of interest with the Class Members. Thus, the 15 interests of Plaintiff and the Class Members are aligned. And the Court finds Plaintiff and 16 her counsel will fairly and adequately protect the interest of the Class. 17 v. Predominance and Superiority – Rule 23(b)(3) 18 a. Predominance 19 “The predominance inquiry focuses on ‘the relationship between the common and 20 individual issues’ and ‘tests whether proposed classes are sufficiently cohesive to warrant 21 adjudication by representation.’” Vinole v. Countrywide Home Loans, Inc., 571 F.3d 935, 22 944 (9th Cir. 2009) (citing Hanlon, 150 F.3d at 1022). The focus of the inquiry is not the 23 presence or absence of commonality as it is under Rule 23(a)(2). Instead, the 24 predominance requirement ensures that common questions “present a significant aspect of 25 the case” such that “there is clear justification”—in terms of efficiency and judicial 26 economy—for resolving those questions in a single adjudication. Hanlon, 150 F.3d at 27 1 1022; see also Vinole, 571 F.3d at 944 (“[A] central concern of the Rule 23(b)(3) 2 predominance test is whether adjudication of common issues will help achieve judicial 3 economy.”). 4 Plaintiff argues the predominance requirement is satisfied because common 5 questions regarding the Class’s “entitlement to the penalties and unpaid wages at issue 6 predominate over individual questions; and each Class Member’s potential statutory legal 7 remedies are identical for the alleged violations.” (Mot. 20.) Plaintiff’s counsel further 8 details these issues in her declaration. (See Richard Decl. ¶¶ 18–22.) Many of these issues 9 involve disputed interpretations of the California Labor Code and threshold questions 10 regarding Class Members’ entitlement to relief. The Court agrees that there are significant, 11 common issues that predominate and provide a “clear justification” for resolving those 12 questions in a single adjudication. See Hanlon, 150 F.3d at 1022; Vinole, 571 F.3d at 944. 13 Hence, the Court finds the predominance requirement is satisfied. 14 b. Superiority 15 “Plaintiffs must also demonstrate that a class action is ‘superior to other available 16 methods for fairly and efficiently adjudicating the controversy.’” Otsuka, 251 F.R.D. at 17 448 (quoting Fed. R. Civ. P. 23(b)(3)). “Where classwide litigation of common issues will 18 reduce litigation costs and promote greater efficiency, a class action may be superior to 19 other methods of litigation,” and it is superior “if no realistic alternative exists.” Valentino 20 v. Carter-Wallace, Inc., 97 F.3d 1227, 1234–35 (9th Cir. 1996). The following factors are 21 relevant to this analysis: 22 (A) the class members’ interest in individually controlling the prosecution or defense of separate actions; 23 (B) the extent and nature of any litigation concerning the controversy 24 already begun by or against class members; (C) the desirability or undesirability of concentrating the litigation of the 25 claims in the particular forum; and 26 (D) the likely difficulties in managing a class action.
27 1 Fed. R. Civ. P. 23(b)(3). In this context, however, the Court need not determine whether 2 the case “would present intractable management problems” if tried. See In re Hyundai & 3 Kia Fuel Econ. Litig., 926 F.3d at 558. 4 Plaintiff argues class treatment is superior to other available methods for fairly and 5 efficiently adjudicating Class Members’ claims because the alternative would be resolving 6 “individual claims for a relatively small amount of damages and penalties.” (Mot. 20.) 7 Further, Plaintiff argues these claims would “prove uneconomic” for individual plaintiffs 8 because “litigation costs would dwarf potential recovery.” (Id. (quoting Hanlon, 150 F.3d 9 at 1023).) The Court agrees and finds the superiority requirement is met in this settlement 10 class context. 11 In sum, the Court provisionally finds the prerequisites for a class action under Rule 12 23 of the Federal Rules of Civil Procedure have been met for the proposed settlement class. 13 2. Preliminary Fairness Determination 14 Having provisionally certified the settlement class, the Court must next make a 15 preliminary determination of whether the Settlement is “fair, reasonable, and adequate” 16 under Rule 23(e)(2). “[T]he very essence of a settlement is compromise, ‘a yielding of 17 absolutes and an abandoning of highest hopes.’” Officers for Justice, 688 F.2d at 624 18 (quoting Cotton v. Hinton, 559 F.2d 1326, 1330 (5th Cir. 1977)). “Naturally, the agreement 19 reached normally embodies a compromise; in exchange for the saving of cost and 20 elimination of risk, the parties each give up something they might have won had they 21 proceeded with litigation.” United States v. Armour & Co., 402 U.S. 673, 681 (1971). 22 Relevant factors to the fairness determination include, among others: 23 the strength of the plaintiffs’ case; the risk, expense, complexity, and likely 24 duration of further litigation; the risk of maintaining class-action status 25 throughout the trial; the amount offered in settlement; the extent of discovery completed and the stage of the proceedings; the experience and views of 26 counsel; the presence of a governmental participant; and the reaction of the 27 class members to the proposed settlement. 1 Hanlon, 150 F.3d at 1026; see also Churchill Vill., L.L.C. v. Gen. Elec., 361 F.3d 566, 575 2 (9th Cir. 2004). 3 i. Strength of the Class’s Case and Risk of Further Litigation 4 Although Plaintiff believes her representative claims are “strong,” she notes 5 Defendant vigorously contests liability and has advanced an assortment of defenses to her 6 allegations. (Mot. 10–14.) The Court has reviewed the potential hurdles the class would 7 have to overcome and agrees that Plaintiff’s case is far from airtight. (See Richard Decl. 8 ¶¶ 16–19.) Plaintiff also highlights that there is a prior class action settlement that could 9 limit the Class’s recovery in this case. Defendant argued its exposure for non-exempt 10 employees prior to December 1, 2016, is limited by Defendant’s payment of $915,000 as 11 part of a court-approved settlement in Mayra Ramirez v. Sherwood Management Co., Inc. 12 (L.A. Superior Court Case No. BC609901) to resolve certain employment and PAGA 13 claims. (Mot. 13; Richard Decl. ¶ 19.) This prior settlement “could limit or significantly 14 reduce exposure and damages” because some Class Members may have released parts of 15 their claims. (Richard Decl. ¶ 19.) 16 In addition, further litigation would be risky, burdensome, and expensive. Plaintiff 17 would have to overcome the motion to dismiss and strike her pleading that Defendant 18 previously filed. (See ECF No. 5.) Plaintiff also would have to prevail on a contested 19 motion to certify the class, and Defendant likely would file a motion for summary 20 judgment. Additional uncertainties would await at trial and on a potential appeal. 21 Plaintiff’s counsel considered these risks in pursuing an early settlement. (Richard Decl. 22 ¶ 33.) The Settlement eliminates many of these risks and seeks to ensure that the Class 23 Members will receive some compensation for their claims. Hence, having considered the 24 strength of the Class’s case and the risks involved in further litigation, the Court finds these 25 considerations weigh in favor of approval of the Settlement. 26 27 1 ii. Amount of the Proposed Settlement 2 The settlement amount is $450,000. Plaintiff’s counsel provides an assessment of 3 this amount in her declaration. (Richard Decl. ¶¶ 20–22.) This assessment is based on a 4 “reasonable estimation of the range of liability associated with the primary statutory 5 penalty and wage claims in this action.” (Id. ¶ 21.) In short, after providing an explanation 6 for each primary claim, Plaintiff’s counsel estimates that the potential recovery on these 7 claims is $3 million. (Id. ¶¶ 21–23.) Given the barriers to recovery highlighted above, 8 including a prior class action settlement involving Defendant’s employees, Plaintiff argues 9 the settlement amount falls within the range of reasonableness. (Mot. 13–15; Richard Decl. 10 ¶¶ 22.) “The settlement amount could undoubtedly be greater, but it is not obviously 11 deficient, and a sizeable discount is to be expected in exchange for avoiding the 12 uncertainties, risks, and costs that come with litigating a case to trial.” See Jaffe v. Morgan 13 Stanley & Co., No. C 06-3903 TEH, 2008 WL 346417, at *9 (N.D. Cal. Feb. 7, 2008). 14 And the inquiry is not whether the Settlement “could be better,” but whether it falls within 15 the range of appropriate settlements. See Hanlon, 150 F.3d at 1027. The Court finds the 16 settlement amount meets this criterion, particularly because Class Members will receive an 17 “immediate recovery” through this compromise, instead of “the mere possibility of relief 18 in the future, after protracted and expensive litigation.” See Nat’l Rural Telecommc’ns. 19 Coop. v. DIRECTV, Inc., 221 F.R.D. 523, 526 (C.D. Cal. 2004). Therefore, this factor 20 weighs in favor of approval. 21 iii. Extent of Discovery Completed and Stage of the 22 Proceedings 23 The court assesses the stage of proceedings and the amount of discovery completed 24 to ensure the parties have an adequate appreciation of the merits of the case before reaching 25 a settlement. See Ontiveros v. Zamora, 303 F.R.D. 356, 371 (E.D. Cal. 2014) (“A 26 settlement that occurs in an advanced stage of the proceedings indicates that the parties 27 1 carefully investigated the claims before reaching a resolution.”). “A court is more likely 2 to approve a settlement if most of the discovery is completed because it suggests that the 3 parties arrived at a compromise based on a full understanding of the legal and factual issues 4 surrounding the case.” Nat’l Rural, 221 F.R.D. at 527. But formal discovery may not be 5 necessary where “the parties have sufficient information to make an informed decision 6 about settlement.” Linney v. Cellular Alaska P’ship, 151 F.3d 1234, 1239 (9th Cir. 7 1998); see also In re Mego Fin. Corp. Sec. Litig., 213 F.3d 454, 459 (9th Cir. 8 2000) (explaining that a combination of investigation, discovery, and research conducted 9 prior to settlement can provide sufficient information for class counsel to make an informed 10 decision about settlement). 11 The parties reached their Settlement in the early stage of these proceedings and 12 before formal discovery. The parties did, however, exchange “data and documents 13 pertaining to Plaintiff” and the Class Members, including “detailed statistical data,” before 14 their mediation. (Richard Decl. ¶ 13.) Given that this Settlement was reached in the 15 infancy of this case, but the parties exchanged information to inform their settlement 16 decision, the Court finds this factor is neutral and therefore does not weigh in favor of 17 approval. 18 iv. Experience and Views of Counsel 19 Because the parties’ counsel are the ones most familiar with the facts of the litigation, 20 courts give “great weight” to their recommendations. Nat’l Rural, 221 F.R.D. at 528; see 21 also In re Pac. Enterprises Sec. Litig., 47 F.3d 373, 378 (9th Cir. 1995) (“Parties 22 represented by competent counsel are better positioned than courts to produce a settlement 23 that fairly reflects each party’s expected outcome in litigation.”). Therefore, the plaintiffs’ 24 counsel’s recommendations “should be given a presumption of reasonableness.” Boyd v. 25 Bechtel Corp., 485 F. Supp. 610, 622 (N.D. Cal. 1979). 26 27 1 Plaintiff’s counsel has significant experience with wage-and-hour class actions. 2 (Richard Decl. ¶¶ 2–5.) She explains her approach to reaching the Settlement, including 3 her consideration of the risk of further litigation and the desire for Class Members to 4 “receive relief in the most expeditious and efficient manner practicable.” (Id. ¶ 33.) She 5 ultimately believes the Settlement “to be fair, reasonable, and adequate and in the best 6 interests of Class Members.” (Id. ¶ 33.) Accordingly, giving the appropriate weight to 7 Plaintiff’s counsel’s recommendation, the Court concludes that this factor weighs in favor 8 of approval.4 9 v. Attorney’s Fee Provision 10 The Settlement Agreement contemplates an award of attorney’s fees and costs to 11 Plaintiff’s counsel. (Settlement Agreement § 11–12.) “In a certified class action, the court 12 may award reasonable attorney’s fees and nontaxable costs that are authorized by law or 13 by the parties’ agreement.” Fed. R. Civ. P. 23(h). “[C]ourts have an independent 14 obligation to ensure that the award, like the settlement itself, is reasonable, even if the 15 parties have already agreed to an amount.” In re Bluetooth Headset Prods. Liab. Litig., 16 654 F.3d 935, 941 (9th Cir. 2011) (citations omitted). For a settlement to be fair and 17 adequate, “a district court must carefully assess the reasonableness of a fee amount spelled 18 out in a class action settlement agreement.” Staton, 327 F.3d at 963. The Ninth Circuit 19 has also warned courts to look for indicia of possible collusion, including a “kicker” 20 provision—where any fees not awarded revert to the defendant—and a “clear sailing 21 agreement”—where the defendant agrees to not object to fees up to a certain amount. See 22 Bluetooth, 654 F.3d at 947. 23 The Settlement Agreement defines “Class Counsel’s Attorney Fees” as “fees agreed 24 upon by the Parties and approved by the Court for Class Counsel’s fees incurred in . . . the 25 26 4 The Court will consider a related factor, the reaction of the class to the settlement, at the final 27 approval stage after Class Members have had an opportunity to weigh in on the Settlement. 1 action . . . and which shall not exceed $135,000. (Settlement Agreement § 11.) “Defendant 2 agrees not to challenge or oppose Class Counsel’s motion or application for attorneys’ fees 3 up to that amount.” (Id.) As mentioned above, the common fund is non-reversionary, and 4 any fees that are not awarded to Plaintiff’s counsel will flow to the Class, not Defendant. 5 (Id. § 8.) Therefore, the Settlement Agreement does not contain a kicker provision, but it 6 does contain a clear sailing provision for a fee request up to $135,000. “[T]he very 7 existence of a clear sailing provision increases the likelihood that class counsel will have 8 bargained away something of value to the class.” Bluetooth, 654 F.3d at 948 (quoting 9 Weinberger v. Great N. Nekoosa Corp., 925 F.2d 518, 525 (1st Cir. 1991)). Consequently, 10 “when confronted with a clear sailing provision, the district court has a heightened duty to 11 peer into the provision and scrutinize closely the relationship between attorneys’ fees and 12 benefit to the class, being careful to avoid awarding ‘unreasonably high’ fees simply 13 because they are uncontested.” Id. (quoting Staton, 327 F.3d at 954). 14 In scrutinizing the clear sailing provision, the Court notes that a maximum award of 15 $135,000 would be 30% of the common fund. Generally, when applying the percentage 16 of recovery method to determine fees, an attorney’s fees award of “twenty-five percent is 17 the ‘benchmark’ that district courts should award.” Pac. Enters., 47 F.3d at 379 (citing Six 18 (6) Mexican Workers v. Ariz. Citrus Growers, 904 F.2d 1301, 1311 (9th Cir. 1990)). That 19 said, fees often range between “20% to 33 1/3% of the total settlement value.” Vasquez v. 20 Coast Valley Roofing, Inc., 266 F.R.D. 482, 491 (E.D. Cal. 2010). Therefore, although the 21 anticipated fee award of 30% would exceed the benchmark, it still may be a reasonable 22 award. 23 Even so, the Court will further scrutinize the fee award because the earlier a case 24 settles, the greater the concern that a percentage award may amount to a windfall for 25 counsel. See, e.g., Fischel v. Equitable Life Assur. Soc’y of the U.S., 307 F.3d 997, 1007 26 (9th Cir. 2002) (“The fact that the case was settled early in the litigation supports the district 27 1 court’s ruling [not to award class counsel’s 25 percent fee award request because] the 25 2 percent benchmark of the percentage-of-the-fund approach might very well have been a 3 ‘windfall.’”). The Court will thus use the lodestar method to cross-check the fee award at 4 final approval “to ensure a fair and reasonable result.” See Alberto v. GMRI, Inc., 252 5 F.R.D. 652, 668 (E.D. Cal. 2008). Further, the Court will require Plaintiff’s counsel to 6 submit her billing records to allow the Court to adequately use the lodestar method as a 7 cross-check. Finally, the Court will advance the proposed deadline for Plaintiff’s counsel 8 to file a motion for attorney’s fees to allow Class Members more time to review the request 9 before the deadline for objections to the Settlement. 10 Accordingly, although the potential fee award will be 30% of the settlement fund 11 and the Settlement Agreement contains a clear sailing provision, these considerations do 12 not doom the Settlement. The Court will further scrutinize the reasonableness of the fee 13 award at the final approval stage. 14 On balance, having considered the factors relevant to the preliminary fairness 15 determination, the Court finds that the Settlement falls within the range of reasonableness 16 meriting possible final approval. The Court therefore preliminarily approves the 17 Settlement and the terms and conditions set forth in the Settlement Agreement, subject to 18 further consideration at the fairness hearing. 19 3. Class Notice 20 Under Rule 23(c)(2)(B), “the court must direct to class members the best notice that 21 is practicable under the circumstances, including individual notice to all members who can 22 be identified through reasonable effort.” Fed. R. Civ. P. 23(c)(2)(B). 23 The notice must clearly and concisely state in plain, easily understood language: (i) the nature of the action; (ii) the definition of the class certified; 24 (iii) the class claims, issues, or defenses; (iv) that a class member may enter 25 an appearance through an attorney if the member so desires; (v) that the court will exclude from the class any member who requests exclusion; (vi) the time 26 27 1 and manner for requesting exclusion; and (vii) the binding effect of a class judgment on members under Rule 23(c)(3). 2 3 Id. “[T]he mechanics of the notice process are left to the discretion of the court subject 4 only to the broad ‘reasonableness’ standards imposed by due process.” Grunin v. Int’l 5 House of Pancakes, 513 F.2d 114, 120 (8th Cir. 1975). 6 Here, the proposed notice describes the litigation, the terms of the Settlement, and 7 each Class Member’s rights and options under the settlement. (Notice of Class Action 8 Settlement, Settlement Agreement Ex. A, ECF No. 13-3.) As outlined above, the 9 Settlement Administrator will distribute Notice Packets to each Class Member through 10 First-Class U.S. Mail “using the most current, known mailing addresses identified in the 11 Class List or through a National Change of Address database search.” (Settlement 12 Agreement § 23.) And having reviewed the proposed notice, the Court finds that the 13 method and content of the notice complies with due process and Rule 23; the notice is the 14 best notice practicable under the circumstances; and the notice shall constitute due and 15 sufficient notice to all persons entitled to notice of the Settlement. Therefore, the Court 16 approves the form and content of the proposed notice as set forth in Exhibit A to the 17 Settlement Agreement. 18 III. CONCLUSION 19 In light of the foregoing, the Court ORDERS Defendant to file its Amended Notice 20 of Removal no later than May 22, 2020. Further, the Court GRANTS Plaintiff’s Motion 21 for Preliminary Approval of Class Action Settlement (ECF No. 13). Accordingly, the 22 Court ORDERS the following: 23 1. Pursuant to Rule 23 of the Federal Rules of Civil Procedure, the Court 24 conditionally certifies the following class for settlement purposes only: all exempt and 25 non-exempt current and former employees of Sherwood Management Co., Inc. who 26 worked in California at any point during the period of February 8, 2015, to August 23, 27 2019. 1 2. The Court appoints Plaintiff Laverna Shannon as Class Representative of the 2 Class. 3 3. The Court appoints Diane E. Richard, Esq. of Richard Law, P.C. as Class 4 Counsel. 5 4. The Court preliminarily approves the Settlement Agreement and the terms and 6 conditions of the Settlement set forth therein, subject to further consideration at the fairness 7 hearing. 8 5. The Court will hold a fairness hearing on Monday, September 21, 2020, at 9 10:30 a.m., in the Courtroom of the Honorable Cynthia Bashant, United States District 10 Court for the Southern District of California, 221–333 West Broadway, San Diego, CA 11 92101, for the following purposes: 12 (a) finally determining whether the Class meets all applicable requirements 13 of Rule 23 of the Federal Rules of Civil Procedure, and thus, whether the claims of the 14 Class should be certified for purposes of effectuating the Settlement; determining whether 15 the proposed Settlement of the action on the terms and conditions provided for in the 16 Settlement Agreement is fair, reasonable, and adequate and should be approved by the 17 Court; 18 (b) considering any motion of Class Counsel for an award of attorney’s 19 fees and costs; 20 (c) considering any motion of Plaintiff for a service award; 21 (d) considering whether the releases by Class Members as set forth in the 22 Settlement Agreement should be provided; and 23 (e) ruling upon such other matters as the Court may deem just and 24 appropriate. 25 6. The Court may adjourn the fairness hearing and later reconvene such hearing 26 without further notice to the Class Members. 27 1 7. Any motion in support of the Settlement and any motion for an award of 2 attorney’s fees and costs or Plaintiff’s service award must be filed with the Court no later 3 than the dates specified below. Plaintiff’s counsel must submit her billing records with any 4 fee motion. Any opposition must be filed no later than fourteen days after the motion is 5 filed, and any reply must be filed no later than twenty-one days after the motion is filed. 6 All other deadlines in the action are stayed pending the fairness hearing. 7 8. The Court appoints CPT Group as the Settlement Administrator. 8 9. The Court approves the form of the “Notice of Class Action Settlement” 9 (“Notice”) (Settlement Agreement Ex. A, ECF No. 13-3 at 24–30) and directs the parties 10 and the Settlement Administrator to carry out their obligations under this order and the 11 Settlement Agreement. The Court authorizes the mailing of the Notice to the Class 12 Members by the deadline below. 13 10. The Court incorporates the procedures for requesting exclusion from the 14 Settlement and objecting to the Settlement as set forth in the Settlement Agreement and the 15 Notice to Class Members. 16 11. The Court specifies deadlines for the Settlement and approval process as 17 follows: 18 Deadline Event 19 May 26, 2020 Deadline for Defendant to provide Settlement Administrator with the Class 20 List. (See Settlement Agreement § 22.) 21 June 16, 2020 Deadline for Settlement Administrator to mail Notice to Class Members. (See 22 Settlement Agreement § 23.) 23 June 29, 2020 Deadline for Class Counsel to file motion for attorney’s fees and costs. 24 July 31, 2020 Last day for Class Members to submit 25 written objections to the Settlement. 26 (See Settlement Agreement §§ 6, 25.) 27 1 July 31, 2020 Last day for Class Members to submit a written Request for Exclusion to be excluded from the Settlement. (See 3 Settlement Agreement §§ 6, 24.) A August 14, 2020 Last day for Settlement Administrator to provide parties with report. (See 5 Settlement Agreement § 28.) 6 August 21, 2020 Deadline for Class Counsel to file Motion for Final Approval of Settlement. 7 September 11, 2020 Last day for filing any responses to any 8 objections.
10 11 IT IS SO ORDERED. J f tha | Ayyh □ 12 || DATED: May 12, 2020 pik MA ‘sad How. Cynthia Bashant 13 United States District Judge 14 15 16 17 18 19 20 21 22 23 24 25 26 27 -25- 28 19cv1101