MEMORANDUM AND ORDER RE: FINAL APPROVAL OF CLASS AND COLLECTIVE ACTION SETTLEMENT
Plaintiff Manuel Murillo brought this action seeking a collective and class action suit against defendant Pacific Gas & Electric Company ("PG&E") for alleged violations of the Fair Labor Standards Act ("FLSA"), 29 U.S.C. §§ 201-219; the California Labor Code, Cal. Lab. Code §§ 201, 203, 204, 226(a), 226.3, 226.7, 510, 512, 1194; and California's Unfair Competition Law ("UCL"), Cal. Bus. & Prof. Code §§ 17200-17210. Presently before the court is plaintiff's motion for final approval of the settlement of his hybrid action which consists of a Federal Rule of Civil Procedure 23(b)(3) class action and FLSA § 216(b) collective action.
I. Factual and Procedural Background
Plaintiff was employed by defendant as a meter reader from February 5, 2006 to May 16, 2008. As part of his compensation, plaintiff received funds to purchase health care and other benefits in lieu of receiving these benefits directly from defendant. These funds were known as the Hiring Hall Line Benefit Premium ("Hiring Hall Premium").
On August 22, 2008, plaintiff filed a putative class and collective action claiming that defendant engaged in unfair and illegal business practices in its payment of meter readers who received the Hiring Hall Premium. (Docket No. 1.) Plaintiff amended his Complaint once as a matter of course. (Docket No. 16.) On July 24, 2009, plaintiff filed a Second Amended Complaint that withdrew several previously asserted causes of action and plead a federal FLSA claim as well as state claims that specifically alleged that defendant (1) failed to properly calculate meter readers' overtime premiums in accordance with the FLSA by excluding the Hiring Hall Premium from its calculations of overtime pay and (2) failed to include all required information on meter readers' paychecks. (Docket No. 26.) Plaintiff filed a motion for conditional certification of a collective action class pursuant to § 216(b) of the FLSA on July 28, 2009, but withdrew this motion one day later. (See Docket Nos. 27, 28.)
On October 6, 2009, the parties attended a day-long mediation session with a neutral third-party mediator, Lester Levy, Esq. of JAMS, where they agreed to settlement terms. The parties then filed a motion for preliminary approval of a class and collective action settlement on January 26, 2010. (Docket No. 30.) In its Order granting preliminary approval of the settlement, the court provisionally certified the following class: "all Hiring Hall meter readers employed by PG&E between August 18, 2006 and December 31, 2009." The court appointed Manuel Murillo as class representative, the Law Offices of Michael Tracy as class counsel, and PG&E as settlement administrator. The court also approved the class opt-in form, opt-out form, and notice of settlement, and directed class counsel to file with the court, within thirty-one days prior to the final fairness hearing, the settlement administrator's declaration setting forth the services rendered, proof of mailing, and list of all class members who opted out of and opted into the settlement. The court set the final fairness hearing for July 19, 2010, at 2:00 p.m.
After conducting the final fairness hearing and carefully considering the settlement terms, the court now addresses whether this collective and class action should receive final certification; whether the proposed settlement is fair, reasonable, and adequate; and whether class counsel's request for attorneys' fees and costs, as well as an incentive payment for the named plaintiff, should be granted.
A. FLSA Collective Certification
The FLSA requires employers to pay an overtime rate of one and one-half times their regular pay rate for hours worked over forty hours in a week. 29 U.S.C. § 207(a). The statute provides that an aggrieved employee may bring a collective action on behalf of himself and other employees "similarly situated" based on an employer's failure to adequately pay overtime wages. Id. § 216(b). To maintain a collective action under the FLSA a plaintiff must demonstrate that the putative collective action members are similarly situated. Id.; Adams v. Inter-Con Sec. Sys., 242 F.R.D. 530, 535-36 (N.D. Cal. 2007); Leuthold v. Destination Am., Inc., 224 F.R.D. 462, 466 (N.D. Cal. 2004).
Neither the FLSA nor the Ninth Circuit have defined "similarly situated." Adams, 242 F.R.D. at 536; Leuthold, 224 F.R.D. at 466. A majority of courts have adopted a two-step approach for determining whether a class is "similarly situated." See Leuthold, 224 F.R.D. at 466 (compiling district court cases following the two-step approach); see, e.g., Thiessen v. Gen. Elec. Capital Corp., 267 F.3d 1095, 1102-03 (10th Cir. 2001); Hipp v. Liberty Nat. Life. Ins. Co., 252 F.3d 1208, 1219 (11th Cir. 2001); Mooney v. Aramco Serv. Co., 54 F.3d 1207, 1213-14 (5th Cir. 1995), overruled on other grounds by Desert Palace, Inc. v. Costa, 539 U.S. 90 (2003). Under this approach, a district court first determines, based on the submitted pleadings and affidavits, whether the proposed class should be notified of the action. Leuthold, 224 F.R.D. at 467. District courts have held that conditional certification requires only that "'plaintiffs make substantial allegations that the putative class members were subject to a single illegal policy, plan or decision.'" Adams, 242 F.R.D. at 536 (citing Leuthold, 224 F.R.D. at 468); see also Thiessen, 267 F.3d at 1102.
The second-step usually occurs after discovery is complete, at which time the defendants may move to decertify the class. Leuthold, 224 F.R.D. at 467. In this step, the court makes a factual determination about whether the plaintiffs are similarly situated by weighing such factors as "(1) the disparate factual and employment settings of the individual plaintiffs, (2) the various defenses available to the defendant which appeared to be individual to each plaintiff, and (3) fairness and procedural considerations." Misra v. Decision One Mortg. Co., 673 F. Supp. 2d 987, 993 (C.D. Cal. 2008) (quotation marks, citations omitted). Even when the parties settle, the court "must make some final class certification finding before approving a collective action settlement." Carter v. Anderson Merchandisers, LP, Nos. EDCV 08-00025-VAP (OPx), EDCV 09-0216-VAP (Opx), 2010 WL 144067, at *3 (C.D. Cal. Jan. 7, 2010) (citations omitted).
The court previously found that plaintiffs satisfied the modest factual showing that is required with respect to the first-step of this approach and granted conditional certification. Since this case did not proceed to trial, defendant did not have the opportunity to decertify the class, and accordingly any motion to decertify under the FLSA is moot. See Misra v. Decision One Mortg. Co., No. SA CV 07-0994 DOC (Rcx), 2009 WL 4581276, at *4 (C.D. Cal. April 13, 2009). Since the analysis required by the second step, including issues of factual similarities between the employees and their claims, largely overlap with class certification analysis under Federal Rule of Civil Procedure 23(a), the court will now turn to analyze the propriety of class certification under Rule 23. See id.
B. Rule 23 Class Certification
The Ninth Circuit has declared that a strong judicial policy favors settlement of class actions. Class Plaintiffs v. City of Seattle, 955 F.2d 1268, 1276 (9th Cir. 1992). Nevertheless, where, as here, "parties reach a settlement agreement prior to class certification, courts must peruse the proposed compromise to ratify both  the propriety of the certification and  the fairness of the settlement." Staton v. Boeing Co., 327 F.3d 938, 952 (9th Cir. 2003).
In conducting the first part of its inquiry, the court "must pay 'undiluted, even heightened, attention' to class certification requirements" because, unlike in a fully litigated class action suit, the court will not have future opportunities "to adjust the class, informed by the proceedings as they unfold." Amchem Prods. Inc. v. Windsor, 521 U.S. 591, 620 (1997); accord Hanlon v. Chrysler Corp., 150 F.3d 1011, 1019 (9th Cir. 1998). The parties cannot "agree to certify a class that clearly leaves any one requirement unfulfilled," and consequently the court cannot blindly rely on the fact that the parties have stipulated that a class exists for purposes of settlement. Berry v. Baca, No. 01-02069, 2005 WL 1030248, at *7 (C.D. Cal. May 2, 2005); see also Amchem, 521 U.S. at 622 (observing that nowhere does Rule 23 say that certification is proper simply because the settlement appears fair). In conducting the second part of its inquiry, the "court must carefully consider 'whether a proposed settlement is fundamentally fair, adequate, and reasonable,' recognizing that '[i]t is the settlement taken as a whole, rather than the individual component parts, that must be examined for overall fairness . . . .'" Staton, 327 F.3d at 952 (quoting Hanlon, 150 F.3d at 1026); see also Fed. R. Civ. P. 23(e) (outlining class action settlement procedures).
Procedurally, the approval of a class action settlement takes place in two stages. In the first stage of the approval process, "'the court preliminarily approve[s] the Settlement pending a fairness hearing, temporarily certifie[s] the Class . . . , and authorize[s] notice to be given to the Class.'" West v. Circle K Stores, Inc., No. 04-0438, 2006 WL 1652598, at *2 (E.D. Cal. June 13, 2006) (quoting In re Phenylpropanolamine (PPA) Prods. Liab. Litig., 227 F.R.D. 553, 556 (W.D. Wash. 2004)). The court previously preliminarily approved the class action settlement in its March 5, 2010 Order. (Docket No. 39.)
In the second stage, the court holds a fairness hearing, after notice is given to putative class members, where the court entertains any of their objections to (1) the treatment of this litigation as a class action and/or (2) the terms of the settlement. See Diaz v. Trust Territory of Pac. Islands, 876 F.2d 1401, 1408 (9th Cir. 1989) (holding that prior to approving the dismissal or compromise of claims containing class allegations, district courts must, pursuant to Rule 23(e), hold a hearing to "inquire into the terms and circumstances of any dismissal or compromise to ensure that it is not collusive or prejudicial"). Following the fairness hearing, the court makes a final determination as to whether the parties should be allowed to settle the class action pursuant to the terms agreed upon. DIRECTV, Inc., 221 F.R.D. at 525.
A class action will be certified only if it meets the four prerequisites identified in Federal Rule of Civil Procedure 23(a) and additionally fits within one of the three subdivisions of Rule 23(b). Although a district court has discretion in determining whether the moving party has satisfied each Rule 23 requirement, Califano v. Yamasaki, 442 U.S. 682, 701 (1979); Montgomery v. Rumsfeld, 572 F.2d 250, 255 (9th Cir. 1978), the court must conduct a rigorous inquiry before certifying a class. Gen. Tel. Co. of the Sw. v. Falcon, 457 U.S. 147, 161 (1982); E. Tex. Motor Freight Sys. v. Rodriguez, 431 U.S. 395, 403-05 (1977).
Rule 23(a) restricts class actions to cases where:
(1) the class is so numerous that joinder of all members is impracticable; (2) there are questions of law or fact common to the class; (3) the claims or defenses of the representative parties are typical of the claims or defenses of the class; and (4) the representative parties will fairly and adequately protect the interests of the class.
Fed. R. Civ. P. 23(a). These requirements are more commonly referred to as numerosity, commonality, typicality, and adequacy of representation, respectively. Hanlon v. Chrysler Corp., 150 F.3d 1011, 1019 (9th Cir. 1998). In the court's Order granting preliminary approval of the settlement, the court found that the putative class satisfied the numerosity, commonality, typicality, and adequacy of representation requirements of Rule 23(a). Since the court is unaware of any changes that would alter its Rule 23(a) analysis, and because the parties indicated at the fairness hearing that they were unaware of any such developments, the court finds that the class definition proposed by plaintiffs meets the requirements of Rule 23(a).
An action that meets all the prerequisites of Rule 23(a) may be maintained as a class action only if it also meets the requirements of one of the three subdivisions of Rule 23(b). Eisen v. Carlisle & Jacquelin, 417 U.S. 156, 163 (1974). In this case, plaintiff seeks certification under Rule 23(b)(3). A class action may be maintained under Rule 23(b)(3) if (1) "the court finds that questions of law or fact common to class members predominate over any questions affecting only individual members," and (2) "that a class action is superior to other available methods for fairly and efficiently adjudicating the controversy." Fed. R. Civ. P. 23(b)(3).
In its Order granting preliminary approval of the settlement, the court found that both prerequisites of Rule 23(b)(3) were satisfied. The court is unaware of any changes that would affect this conclusion, and the parties indicated at the fairness hearing that they were aware of no such developments. Accordingly, since the settlement class satisfies both Rule 23(a) and 23(b)(3), the court will grant final class and collective action certification.
C. Rule 23(e): Fairness, Adequacy, and Reasonableness of Proposed Settlement
Having determined that class treatment appears to be warranted, the court must now address whether the terms of the parties' settlement appear fair, adequate, and reasonable. In conducting this analysis, the court must balance several 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 throughout the 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.
Hanlon, 150 F.3d at 1026; but see Molski v. Gleich, 318 F.3d 937, 953-54 (9th Cir. 2003) (noting that a district court need only consider some of these factors--namely those designed to protect absentees).
1. Terms of the Settlement Agreement
The key terms of the settlement agreement ...