1 2 3 4 5 7 NORTHERN DISTRICT OF CALIFORNIA 8
10 GEORGE STICKLES and MICHELE RHODES, 11 No. C 20-09220 WHA Plaintiffs, 12
v.
13 ORDER RE MOTIONS FOR FINAL ATRIA SENIOR LIVING, INC., and APPROVAL OF SETTLEMENT AND 14 ATRIA MANAGEMENT COMPANY, ATTORNEY’S FEES, COSTS, LLC, SERVICE AWARD, AND 15 SETTLEMENT ADMINISTRATION Defendants. EXPENSES 16
18 In this wage-and-hour class action, plaintiffs move for final approval of class settlement 19 as well as for related fees, costs, and awards. Defendants do not oppose. For the reasons 20 stated herein, and to the extent stated below, the motions are GRANTED. 22 Our prior orders more fully describe the facts underlying this action. E.g., Stickles v. 23 Atria Senior Living, Inc., 642 F. Supp. 3d 1104, 1108 (N.D. Cal. 2022). In sum, plaintiffs 24 George Stickles and Michele Rhodes worked as “Community Sales Directors” (CSDs) for 25 defendants, Atria Senior Living, Inc. and Atria Management Company, LLC. This action 26 concerns whether defendants improperly classified CSDs such that CSDs were not entitled to 27 overtime and meal-and-rest break rules under California law. Plaintiff Stickles asserts six class 1 claims for violations of California law, and plaintiff Rhodes asserts a California Private 2 Attorneys General Act (“PAGA”) representative claim premised on the same violations. 3 A class was certified in December 2021 with the following definition: CSDs who did not 4 sign arbitration agreements and whom defendants classified as exempt outside salespersons 5 from April 9, 2018, through September 29, 2019. The class was certified solely to the issue of 6 whether defendants properly classified CSDs as exempt outside salespersons. Both sides 7 subsequently moved for summary judgment on that certified issue, which resolved in 8 plaintiffs’ favor in November 2022. 9 Before the summary judgment motions were decided, defendants also moved to compel 10 arbitration of plaintiff Rhodes’s PAGA claim. The representative PAGA claim included as 11 aggrieved employees all CSDs who were classified as exempt outside salespersons from 12 January 27, 2020 through May 2, 2020. As the motions were pending, the parties entered into 13 settlement discussions and moved for approval of a proposed class and PAGA settlement. 14 That settlement was rejected in June 2022, in large part because of an overly broad PAGA 15 claim release (see Mem. Supp. Final Approval 4–5, Dkt. No. 125-1). The parties were unable 16 to reach a revised settlement, so the litigation schedule resumed, although the arbitration 17 motion was determined moot with an opportunity to promptly resubmit (Dkt. No. 102). After 18 summary judgment, and following a belated attempt to compel arbitration that was denied, the 19 parties once again moved for approval of class and PAGA settlement. This time, the $1.3 20 million proposed settlement was deemed satisfactory to proceed at a fairness hearing, and after 21 adjustments to the proposed class notice, an order granted preliminary approval of class and 22 PAGA settlement in April 2023 (Dkt. No. 123). 23 Of the 73 putative class members initially identified, two opted out of this class action 24 upon notification of class certification in March 2022. It later turned out that of the 71 class 25 members, two did not fall under the class definition as they were not CSDs during the class 26 period, leaving 69 class members (Hayes Decl. ¶¶ 15, 31, Dkt. No. 125-2). Notice of class 27 settlement appears to have reached all 69, as no notices have been deemed undeliverable. No 1 opt-outs, objections, or calculation disputes have been received (Lee Decl. ¶¶ 4–11, Dkt. No. 2 125-3). 3 Plaintiffs now move for final approval of the class settlement and, separately, for 4 attorney’s fees, costs, and a class representative service award (Dkt. Nos. 124, 125). This 5 order follows a final fairness hearing on October 10, 2023. 7 This order first addresses the merits of the settlement, before determining the fees, costs, 8 and awards that are warranted by such a settlement. 9 1. SETTLEMENT. 10 “The class action device, while capable of the fair and efficient adjudication of a large 11 number of claims, is also susceptible to abuse and carries with it certain inherent structural 12 risks.” Officers for Just. v. Civ. Serv. Comm’n of S.F., 688 F.2d 615, 623 (9th Cir. 1982). As 13 Rule 23(e)(2) prescribes, a district court may grant approval of a settlement that would bind 14 class members only after a hearing and only upon a finding that it is fair, reasonable, and 15 adequate. 16 Our court of appeals has explained that any such finding under Rule 23(e)(2) “will 17 naturally vary from case to case,” but that the eight Churchill factors generally guide the 18 assessment, which are:
19 (1) the strength of the plaintiff’s case; (2) the risk, expense, complexity, and likely duration of further litigation; (3) the risk of 20 maintaining class action status throughout the trial; (4) the amount offered in settlement; (5) the extent of discovery completed and the 21 stage of the proceedings; (6) the experience and views of counsel; (7) the presence of a governmental participant; and (8) the reaction 22 of the class members of the proposed settlement. 23 In re Bluetooth Headset Prod. Liab. Litig., 654 F.3d 935, 946 (9th Cir. 2011) (quoting 24 Churchill Vill., L.L.C. v. Gen. Elec., 361 F.3d 566, 575 (9th Cir. 2004)). 25 Meanwhile, Rule 23(e)(2) itself, as amended in 2018, requires a district court to 26 scrutinize the settlement for evidence of collusion or conflicts of interest by assessing whether: 27 (A) the class representatives and class counsel have adequately represented the class; (B) the 1 (D) the proposal treats class members equitably relative to each other. Additional related 2 considerations are laid out in the judge’s notice regarding factors to be evaluated for any 3 proposed class settlement, filed February 2022 (Dkt. No. 76). 4 Plaintiffs’ counsel submits that the $1.3 million settlement represents “roughly 35% of 5 the maximum potential recovery” and that “there are significant risks that undercut that [sic] 6 chances of securing a full recovery on each of the claims” (Mem. Supp. Final Approval 15–16; 7 see Hayes Decl. ¶¶ 47–66). In particular, plaintiffs cite unsettled law regarding the “outside 8 salesperson” exemption (on which plaintiffs prevailed at summary judgment) presenting a risk 9 on appeal, as well as potential application of an alternative, “administrative” exemption, both 10 of which would deny plaintiffs recovery altogether as both are threshold issues for whether 11 CSDs were misclassified. Beyond those threshold issues, plaintiffs identify further barriers 12 that each specific claim faces, such as the need for granular evidence of specific hours worked 13 by an individual plaintiff to support overtime and meal-and-rest break claims (Mem. Supp. 14 Final Approval 10–14). 15 Indeed, our order certifying the class was limited to adjudicating a single affirmative 16 defense, and explicitly held certification of the underlying wage-and-hour claims in abeyance. 17 Stickles v. Atria Senior Living, Inc., No. C 20-09220 WHA, 2021 WL 6117702, at *11 (N.D. 18 Cal. Dec. 27, 2021). Our order granting summary judgment in favor of plaintiffs likewise 19 precluded only that affirmative defense, rejecting defendants’ assertion of other defenses 20 because defendants “did not raise (and this order need not consider) any other exemption for 21 purposes of class-wide summary judgment.” Stickles, 642 F. Supp. 3d at 1115.
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1 2 3 4 5 7 NORTHERN DISTRICT OF CALIFORNIA 8
10 GEORGE STICKLES and MICHELE RHODES, 11 No. C 20-09220 WHA Plaintiffs, 12
v.
13 ORDER RE MOTIONS FOR FINAL ATRIA SENIOR LIVING, INC., and APPROVAL OF SETTLEMENT AND 14 ATRIA MANAGEMENT COMPANY, ATTORNEY’S FEES, COSTS, LLC, SERVICE AWARD, AND 15 SETTLEMENT ADMINISTRATION Defendants. EXPENSES 16
18 In this wage-and-hour class action, plaintiffs move for final approval of class settlement 19 as well as for related fees, costs, and awards. Defendants do not oppose. For the reasons 20 stated herein, and to the extent stated below, the motions are GRANTED. 22 Our prior orders more fully describe the facts underlying this action. E.g., Stickles v. 23 Atria Senior Living, Inc., 642 F. Supp. 3d 1104, 1108 (N.D. Cal. 2022). In sum, plaintiffs 24 George Stickles and Michele Rhodes worked as “Community Sales Directors” (CSDs) for 25 defendants, Atria Senior Living, Inc. and Atria Management Company, LLC. This action 26 concerns whether defendants improperly classified CSDs such that CSDs were not entitled to 27 overtime and meal-and-rest break rules under California law. Plaintiff Stickles asserts six class 1 claims for violations of California law, and plaintiff Rhodes asserts a California Private 2 Attorneys General Act (“PAGA”) representative claim premised on the same violations. 3 A class was certified in December 2021 with the following definition: CSDs who did not 4 sign arbitration agreements and whom defendants classified as exempt outside salespersons 5 from April 9, 2018, through September 29, 2019. The class was certified solely to the issue of 6 whether defendants properly classified CSDs as exempt outside salespersons. Both sides 7 subsequently moved for summary judgment on that certified issue, which resolved in 8 plaintiffs’ favor in November 2022. 9 Before the summary judgment motions were decided, defendants also moved to compel 10 arbitration of plaintiff Rhodes’s PAGA claim. The representative PAGA claim included as 11 aggrieved employees all CSDs who were classified as exempt outside salespersons from 12 January 27, 2020 through May 2, 2020. As the motions were pending, the parties entered into 13 settlement discussions and moved for approval of a proposed class and PAGA settlement. 14 That settlement was rejected in June 2022, in large part because of an overly broad PAGA 15 claim release (see Mem. Supp. Final Approval 4–5, Dkt. No. 125-1). The parties were unable 16 to reach a revised settlement, so the litigation schedule resumed, although the arbitration 17 motion was determined moot with an opportunity to promptly resubmit (Dkt. No. 102). After 18 summary judgment, and following a belated attempt to compel arbitration that was denied, the 19 parties once again moved for approval of class and PAGA settlement. This time, the $1.3 20 million proposed settlement was deemed satisfactory to proceed at a fairness hearing, and after 21 adjustments to the proposed class notice, an order granted preliminary approval of class and 22 PAGA settlement in April 2023 (Dkt. No. 123). 23 Of the 73 putative class members initially identified, two opted out of this class action 24 upon notification of class certification in March 2022. It later turned out that of the 71 class 25 members, two did not fall under the class definition as they were not CSDs during the class 26 period, leaving 69 class members (Hayes Decl. ¶¶ 15, 31, Dkt. No. 125-2). Notice of class 27 settlement appears to have reached all 69, as no notices have been deemed undeliverable. No 1 opt-outs, objections, or calculation disputes have been received (Lee Decl. ¶¶ 4–11, Dkt. No. 2 125-3). 3 Plaintiffs now move for final approval of the class settlement and, separately, for 4 attorney’s fees, costs, and a class representative service award (Dkt. Nos. 124, 125). This 5 order follows a final fairness hearing on October 10, 2023. 7 This order first addresses the merits of the settlement, before determining the fees, costs, 8 and awards that are warranted by such a settlement. 9 1. SETTLEMENT. 10 “The class action device, while capable of the fair and efficient adjudication of a large 11 number of claims, is also susceptible to abuse and carries with it certain inherent structural 12 risks.” Officers for Just. v. Civ. Serv. Comm’n of S.F., 688 F.2d 615, 623 (9th Cir. 1982). As 13 Rule 23(e)(2) prescribes, a district court may grant approval of a settlement that would bind 14 class members only after a hearing and only upon a finding that it is fair, reasonable, and 15 adequate. 16 Our court of appeals has explained that any such finding under Rule 23(e)(2) “will 17 naturally vary from case to case,” but that the eight Churchill factors generally guide the 18 assessment, which are:
19 (1) the strength of the plaintiff’s case; (2) the risk, expense, complexity, and likely duration of further litigation; (3) the risk of 20 maintaining class action status throughout the trial; (4) the amount offered in settlement; (5) the extent of discovery completed and the 21 stage of the proceedings; (6) the experience and views of counsel; (7) the presence of a governmental participant; and (8) the reaction 22 of the class members of the proposed settlement. 23 In re Bluetooth Headset Prod. Liab. Litig., 654 F.3d 935, 946 (9th Cir. 2011) (quoting 24 Churchill Vill., L.L.C. v. Gen. Elec., 361 F.3d 566, 575 (9th Cir. 2004)). 25 Meanwhile, Rule 23(e)(2) itself, as amended in 2018, requires a district court to 26 scrutinize the settlement for evidence of collusion or conflicts of interest by assessing whether: 27 (A) the class representatives and class counsel have adequately represented the class; (B) the 1 (D) the proposal treats class members equitably relative to each other. Additional related 2 considerations are laid out in the judge’s notice regarding factors to be evaluated for any 3 proposed class settlement, filed February 2022 (Dkt. No. 76). 4 Plaintiffs’ counsel submits that the $1.3 million settlement represents “roughly 35% of 5 the maximum potential recovery” and that “there are significant risks that undercut that [sic] 6 chances of securing a full recovery on each of the claims” (Mem. Supp. Final Approval 15–16; 7 see Hayes Decl. ¶¶ 47–66). In particular, plaintiffs cite unsettled law regarding the “outside 8 salesperson” exemption (on which plaintiffs prevailed at summary judgment) presenting a risk 9 on appeal, as well as potential application of an alternative, “administrative” exemption, both 10 of which would deny plaintiffs recovery altogether as both are threshold issues for whether 11 CSDs were misclassified. Beyond those threshold issues, plaintiffs identify further barriers 12 that each specific claim faces, such as the need for granular evidence of specific hours worked 13 by an individual plaintiff to support overtime and meal-and-rest break claims (Mem. Supp. 14 Final Approval 10–14). 15 Indeed, our order certifying the class was limited to adjudicating a single affirmative 16 defense, and explicitly held certification of the underlying wage-and-hour claims in abeyance. 17 Stickles v. Atria Senior Living, Inc., No. C 20-09220 WHA, 2021 WL 6117702, at *11 (N.D. 18 Cal. Dec. 27, 2021). Our order granting summary judgment in favor of plaintiffs likewise 19 precluded only that affirmative defense, rejecting defendants’ assertion of other defenses 20 because defendants “did not raise (and this order need not consider) any other exemption for 21 purposes of class-wide summary judgment.” Stickles, 642 F. Supp. 3d at 1115. All told, while 22 the litigation so far has managed to preclude a relevant affirmative defense on a classwide 23 basis, each class member faces additional, significant hurdles to ultimately recover on their 24 claims. “Currently, to repeat, only the issue of [outside salesperson] classification glues this 25 class together — future class certification motions on the other claims await,” and even “a 26 damages phase could require still more painstaking litigation.” See Kudatsky v. Tyler Techs., 27 Inc., No. C 19-07647 WHA, 2021 WL 5356724, at *2–3 (N.D. Cal. Nov. 17, 2021). The first 1 Plaintiffs’ counsel estimates a “realistic maximum potential recovery of approximately 2 $3,705,718 if Plaintiffs ultimately prevailed on all claims” which “consists of $2,162,160 in 3 unpaid overtime, $960,960 in missed meal-and-rest period premiums, $276,000 in statutory 4 wage statement penalties, $206,098 in statutory waiting time penalties, and $100,500 in PAGA 5 civil penalties” (Hayes Decl. ¶ 41). The settlement amount of $1,300,000 thus represents 35% 6 of that potential maximum. Plaintiffs’ counsel is experienced in wage-and-hour actions, and 7 asserts that the settlement here represents an “an excellent result” (Hayes Decl. ¶¶ 4–6, 66). 8 None of our 69 class members opted out of the settlement, nor were any objections received. 9 No government entity participated in this action, so the seventh factor is at best neutral. The 10 remainder of the Churchill factors thus weigh in favor of approval. See Kudatsky, 2021 WL 11 5356724, at *3 (approving wage-and-hour settlement for 30.5% recovery of the maximum 12 estimated value). 13 Distinct from the Churchill factors, Rule 23(e)(2) requires “scrutinizing the fee 14 arrangement for potential collusion or unfairness to the class” by an approving district court, 15 among other considerations. Briseño v. Henderson, 998 F.3d 1014, 1025–26 (9th Cir. 2021). 16 Importantly, “the class must be notified of a proposed settlement in a manner that does not 17 systematically leave any group without notice.” Officers for Just., 688 F.2d at 624. The 18 settlement administrator explains that when notice was sent to our 69 class members via first- 19 class mail, four were returned. The administrator performed skip traces for updated addresses 20 and re-mailed notices for all four, with no further returns (Lee Decl. ¶¶ 4–7). The notice 21 informed class members about all key aspects of the settlement as previously discussed at 22 preliminary approval, and was further amended pursuant to our prior order to “advise class 23 members that the attorneys’ fees, costs, and service award will be deducted from the settlement 24 fund and reduce the recovery of each class member” (Dkt. No. 120). No claim forms are 25 required, as class members will simply be mailed a settlement check. It appears all class 26 members received adequate notice of the settlement and its terms, which supports approval of 27 settlement. 1 As for the adequacy of relief provided, according to the current plan for which approval 2 is sought, the net settlement amount post-deductions to be distributed amongst the class of 69 3 would be $885,287.02, meaning an average recovery of $12,830.25 per member, with the 4 highest individual payment at $19,695.49. The PAGA settlement amount is not included in 5 that net settlement amount: the settlement agreement separately allocates $40,200 of the $1.3 6 million towards plaintiff Rhodes’s representative claim for PAGA penalties, and the foregoing 7 calculation of the net settlement amount counts the PAGA settlement amount as a deduction to 8 arrive at the figure of $885,287.02 (Lee Decl. ¶¶ 11–13). Counsel represents that the PAGA 9 settlement “constitutes 40% of the realistic maximum exposure of $100,500 in PAGA 10 penalties” (Hayes Decl. ¶ 64). In accordance with California Labor Code Section 2699(i), of 11 the $40,200 PAGA settlement amount, 75% will be paid to the Labor and Workforce 12 Development Agency and 25% will be distributed to the aggrieved employees of the PAGA 13 claim, of which there are 58, to be allocated according to pay periods worked during the PAGA 14 period. The average individual PAGA payment to each aggrieved employee is $173.28 (Lee 15 Decl. ¶ 14). This order finds that these numbers provide more than mere nominal relief within 16 context of this action. 17 As for the implications of the settlement terms, the settlement amount is non- 18 reversionary, and there is no clear sailing arrangement that predetermines attorney’s fees and 19 other awards (Hayes Decl. ¶ 37; Mem. Supp. Final Approval 20). Plaintiffs’ counsel 20 represents that they have made “all of the modifications previously required by the Court” 21 when a proposed settlement was rejected in June 2022 (Hayes Decl. ¶ 37). Crucially, this 22 included modifying the release of claims — and in particular the PAGA claim — to more 23 properly reflect our operative complaint (Hayes Decl. ¶ 29). Individual settlement amounts for 24 both the class and PAGA claims are determined based on the number of pay periods worked, 25 and uncashed settlement checks will be deposited with this district court’s Unclaimed Funds 26 Registry. See About Unclaimed Funds, U.S. Dist. Ct. N. Dist. Cal., 27 https://cand.uscourts.gov/about/clerks-office/finance/unclaimed-funds-information/. No 1 There are no signs of inequitable treatment between class members or collusion, and the 2 settlement appears negotiated at arm’s length and adequate in light of the foregoing. Our 3 evaluation prescribed by Rule 23 thus warrants approval of settlement. The motion for class 4 settlement is GRANTED. 5 2. FEES, COSTS, AND AWARDS. 6 Class counsel seek $325,000 in attorney’s fees, representing 25% of the total settlement 7 amount. Consideration of attorney’s fees is “subject to the determination whether the 8 settlement is ‘fundamentally fair, adequate, and reasonable.’” Staton v. Boeing Co., 327 F.3d 9 938, 963 (9th Cir. 2003) (quoting FRCP 23(e)). “In ‘common-fund’ cases where the 10 settlement or award creates a large fund for distribution to the class, the district court has 11 discretion to use either a percentage or lodestar method.” Hanlon v. Chrysler Corp., 150 F.3d 12 1011, 1029 (9th Cir. 1998). Our court of appeals “has established 25% of the common fund as 13 a benchmark award for attorney fees.” Ibid. Counsel further represent that their lodestar 14 calculation results in an amount of $540,750, which exceeds the requested amount. The 15 “negative multiplier suggests that the fee request is reasonable,” and this order agrees. 16 Schneider v. Chipotle Mexican Grill, Inc., 336 F.R.D. 588, 601 (N.D. Cal. 2020) (Judge 17 Haywood S. Gilliam, Jr.) (citations omitted). The request for attorney’s fees of $325,000 is 18 approved, with half to be awarded now and the remaining half to be awarded only after 19 distribution of the settlement fund to the class is completed. 20 Class counsel further seek costs in the amount of $37,512.98, which were incurred over 21 two-and-a-half years of litigation. Additionally, the settlement administrator Phoenix Class 22 Action Administrators seeks $7,000 in fees. This order finds no fault in the compendium of 23 evidence for such costs, and approves the award of costs to both class counsel and the 24 settlement administrator as reasonable. Should Phoenix seek additional costs however, a new 25 motion must be brought to explain why such costs are merited. 26 Finally, plaintiff Stickles is the appointed class representative and requests a service 27 award of $5,000. This presents a problem. As explained in the judge’s notice and order 1 itself is not good enough for the named plaintiff, why should it be good enough for absent class 2 members similarly situated?” (Dkt. No. 76). This is the fundamental tension between “service 3 awards” — sometimes referred to as “incentive awards” — and a representative plaintiffs 4 fiduciary duty to the class. There is a risk that such awards can cloud the judgment of a class 5 representative whose purpose is to determine whether a settlement is fair and reasonable to all 6 class members. Class actions worked fine before the advent of incentive awards, and they will 7 continue to do so without them. Plenty of incentives for meritorious litigation exist outside of 8 a service award. Indeed, given the terms of the settlement and as plaintiffs’ counsel 9 recognizes, any denied amount of service award “would simply increase the net settlement 10 fund available for distribution to the Settlement Class” (Mem. Supp. Final Approval 20). This 11 order finds that $500 is the most that could be awarded here without risk of clouding a class 12 representative’s judgment. To the extent stated in the foregoing, the motion for fees, costs, and 13 awards is GRANTED. CONCLUSION 3 15 For the reasons stated herein and to the extent previously stated on the record and 16 reflected herein, the motions for final approval of class settlement and for related fees, costs, 3 17 and awards are GRANTED. Judgment will be entered accordingly. 18 20 21 Dated: October 11, 2023. 22 LA = ne WILLIAM ALSUP 23 UNITED STATES DISTRICT JUDGE 24 25 26 27 28