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In re Stern

April 13, 2009


The opinion of the court was delivered by: Jan M. Adler U. S. Magistrate Judge


Plaintiffs Gerald Till, Denny Bilikas and Craig Taggart ("Plaintiffs" or "class representatives") and Defendant M.L. Stern & Co., LLC ("M.L. Stern" or "Defendant") filed a joint motion requesting that the Court: (1) grant preliminary approval of the proposed settlement; (2) certify the settlement class for settlement purposes only; (3) approve the form and manner of providing notice to the settlement class; and (4) schedule a date for the final fairness approval hearing ("Joint Motion"). The Court has reviewed all papers filed in support of the Joint Motion and hereby GRANTS the Joint Motion.

I. Factual and Procedural Background

On June 5, 2007, Plaintiffs filed a consolidated class action complaint against M.L. Stern, alleging that it: (1) misclassified its Account Executives as exempt employees, thereby denying them overtime pay in violation of California law; (2) failed to compensate them at the prevailing minimum wage rate; (3) failed to provide them with all of their required meal and rest breaks; (4) took illegal deductions from their wages; and (5) failed to retain and provide accurate records of actual hours worked and wages earned by Plaintiffs and the class. Stipulation of Settlement ("Settlement") at ¶¶ 30-31.

The parties conducted discovery and Plaintiffs reviewed over 1,200 pages of documents produced by M.L. Stern. Declaration of Gerald D. Wells, III in support of the Joint Motion ("Wells Decl."), ¶ 17. Plaintiffs' counsel contend that they conducted a thorough investigation into the facts of this case and diligently investigated class members' claims against M.L. Stern, including: (1) interviewing class members and analyzing the results of class member interviews; (2) reviewing relevant documents; and (3) researching the applicable law and the potential defenses. Settlement at ¶ 34.

On September 6, 2007, the parties participated in an Early Neutral Evaluation conference ("ENE") with the undersigned magistrate judge. After the ENE, Defendant obtained settlement releases from all but one of its then-current Account Executives. Id. at ¶ 33.

On July 10, 2008, the parties engaged in an all-day mediation with attorney Linda Singer, a well-respected mediator experienced in wage and hour litigation. The mediation resulted in the settlement that is now presented to this Court for preliminary approval. Id.

II. The Proposed Settlement

Defendant agrees to pay $945,960 into an interest-bearing account within 15 days after the date of the entry of this Order. Id. at ¶¶ 27, 44. Prior to distribution to class members, the settlement fund will be used to pay: (I) notice costs; (ii) attorneys' fees in the maximum amount of 25% and expenses, subject to Court approval; (iii) $15,000 for each of the three class representatives for their services relating to class representation, subject to Court approval; (iv) reasonable claims administration costs; and (v) $20,000 to the California Labor Workforce Development Agency for its share of the claims for penalties under the California Labor Code Private Attorney General Act. Id. at ¶40.

III. Certification of a Settlement Class

The parties have stipulated, for settlement purposes only, to certification of a class consisting of: "All persons who were employed by M.L. Stern in a Covered Position [as an Account Executive] in the State of California at any time between November 13, 2002 and December 31, 2006, who have not previously signed a settlement releasing M.L. Stern from any claims asserted in the Complaint." Id. at ¶ 39. M.L. Stern estimates that the settlement class consists of approximately 180 individuals who were employed by M.L. Stern as Account Executives in the State of California. Joint Motion at 5. In addition, there are approximately 40 individuals who were employed by M.L. Stern as Account Executives in the State of Nevada. Id. Pursuant to the settlement, the Nevada employees have the option of "opting-in" to the settlement class to participate in the settlement; if they do not do so, they will not be bound by the settlement.

Settlementat ¶

In response to the Court's Order requiring clarification regarding why the Nevada Account Executives are being permitted to opt-in to the settlement, whereas the California Account Executives will be bound by the settlement unless they opt-out [Doc. 69], Plaintiffs filed a supplemental memorandum in further support of their Joint Motion ("Supplemental Memo.") [Doc. 70]. Plaintiffs explain that the Complaint in this action is brought only on behalf of California Account Executives and is predicated on violations of California state wage and hour laws. Supplemental Memo. at 2. However, during the mediation process, Defendant provided data relating to Account Executives located in Nevada, and the parties began discussing how to account for the Nevada employees who were not previously part of the case. Id. at 3. Plaintiffs' counsel were reluctant to group the Nevada individuals into the Rule 23 settlement class for two reasons: (1) as there were only approximately 40 Nevada Account Executives, there was a concern that there might not be a sufficient number of individuals harmed to satisfy the numerosity requirement of Rule 23(a)(1), and (2) there are factual and legal differences between wage and hour claims under California state law and Nevada state law; for example, California has a number of state wage and hour claims for which there is no analogue under Nevada state Id. at 3-4. Accordingly, the parties determined that the Nevada Account Executives would be permitted to participate in the settlement pursuant to the terms of the Fair Labor Standards Act ("FLSA"), which permits individuals to bring suits on behalf of themselves and others who are "similarly situated" and allows aggrieved individuals to opt-in to such suits. Id. at 4; 29 U.S.C. § 216(b).

The Court conditionally finds that the proposed class meets the requirements for certification under Rule 23(a) and (b)(3) of the Federal Rules of Civil Procedure: (a) the proposed class is so numerous that joinder of all members of the class is impracticable; (b) there are questions of law and fact common to the proposed class, and there is a well-defined community of interest among members of the proposed class with respect to the subject matter of this action; (c) the claims of some or all of the class representatives are typical of the claims of the members of the proposed class; (d) the class representatives will fairly and adequately protect the interests of the proposed class members; (e) the questions of law or fact common to class members predominate over any questions affecting only individual members; (f) a class action is superior to other available methods for an efficient adjudication of this controversy; and (g) counsel for the class representatives are qualified to serve as counsel for the class representatives in their own capacities as well as their representative capacities and for the settlement class. The Court also conditionally finds that it is appropriate to allow the Nevada Account Executives the option to opt-in to the settlement class, as this will allow the parties to resolve the claims of the de minimis number of Nevada Account Executives who wish to partake in the Settlement.

IV. Preliminary Approval of the Settlement

A. Legal Standard

Federal Rule of Civil Procedure 23(e)(1) requires the Court to determine whether a settlement is "fair, reasonable, and adequate." To make this determination, the court considers certain factors: (1) the strength of the plaintiff's case and the risk, expense, complexity, and likely duration of further litigation; (2) the risk of maintaining class action status throughout trial; (3) the amount offered in settlement; (4) the extent of discovery completed, and the stage of the proceedings, and (5) the experience and views of counsel. Staton v. Boeing Co., 327 F.3d 938, 959 (9th Cir. 2003), quoting Molski v. Gleich, 318 F.3d 937, 953 (9th Cir. 2003). In addition, the settlement may not be the product of collusion among the negotiating parties. In re Mego Financial Corp. Sec. ., 213 F.3d 454, 458 (9th Cir. 2000).

As explained in the Manual for Complex Litigation, cited by the parties in their Joint Motion at 14, court approval of a class action settlement involves a two-step process -- preliminary approval, followed by final approval of the settlement after notice to the Review of a proposed class action settlement generally involves two hearings. First, counsel submit the proposed terms of settlement and the judge makes a preliminary fairness evaluation. . . If the case is presented for both class certification and settlement approval, the certification hearing and preliminary fairness evaluation can usually be combined. The judge should make a preliminary determination that the proposed class satisfies the criteria set out in Rule 23(a) and at least one of the subsections of Rule 23(b). . . The judge must make a preliminary determination on the fairness, reasonableness, and adequacy of the settlement terms and must direct the preparation of notice of the certification, proposed settlement, and date of the final fairness hearing.

Manual for Complex Litigation Fourth § 21.632 (2004); Torrisi v. Tucson Elec. Power , 8 F.3d 1370, 1377 (9th Cir. 1993) (noting and implicitly approving the district court's use of the preliminary approval process).

Because class members will subsequently receive notice and have an opportunity to be heard on the settlement, this Court need not review the settlement in detail at this juncture; instead, preliminary approval is appropriate so long as the proposed settlement falls "within the range of possible judicial approval." A. Conte & H.B. Newberg, Newberg on Class Actions, § 11.25 (4th ed. 2002), quoting Manual for Complex Litigation § 30.41 (1997). Accordingly, the Court, in this Order, will simply consider whether the settlement is within the range of possible approval, such that there "is any reason to notify ...

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