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Shaunetta Eddings, Individually and On Behalf of A Class of Similarly v. Health Net

UNITED STATES DISTRICT COURT CENTRAL DISTRICT OF CALIFORNIA


January 16, 2013

SHAUNETTA EDDINGS, INDIVIDUALLY AND ON BEHALF OF A CLASS OF SIMILARLY SITUATED INDIVIDUALS, PLAINTIFF,
v.
HEALTH NET, INC., ET AL. DEFENDANTS.

The opinion of the court was delivered by: Josephine Staton Tucker United States District Judge

O

ORDER GRANTING PLAINTIFF'S MOTION FOR PRELIMINARY APPROVAL OF SETTLEMENT AND SETTING A FAIRNESS HEARING FOR FRIDAY, MAY 31, 2013, AT 2:30 P.M. (Docs. 212, 213.)

I.INTRODUCTION

Before the Court is Plaintiff Shaunetta Eddings' ("Plaintiff's") unopposed Motion for Preliminary Approval of Settlement ("Motion"). (Doc. 212.) The Motion asks the Court to preliminarily approve the proposed settlement, approve the form and method of class notice, and set the schedule for final settlement approval. The Court finds this matter appropriate for decision without oral argument. Fed. R. Civ. P. 78(b); C.D. Cal. R.. 7-15. Accordingly, the hearing set for January 18, 2013, at 2:30 p.m. is VACATED. Having reviewed and considered the papers, the Court GRANTS Plaintiff's Motion, orders certain modifications to be made, particularly as to the notice form to class members, and sets a fairness hearing for Friday, May 31, 2013, at 2:30 p.m.

II.BACKGROUND

On October 6, 2010, Plaintiff filed the operative complaint, the Second Amended Complaint ("SAC"), against Defendants Health Net, Inc.; Health Net of California, Inc.; Health Net Federal Services, LLC; Managed Health Network, Inc.; Health Net of the Northeast, Inc.; Health Net Pharmaceutical Services, Inc. (collectively "Defendants"). Plaintiff's SAC asserted that Defendants violated the Fair Labor Standards Act ("FLSA") and various California state labor laws by failing to pay Plaintiff, and other similarly situated employees, for all time worked, based on time worked "off-the-clock" and Defendants' alleged rounding of timekeeping entries. (Mem. P. & A. ISO Mot. ("Memo.") at 2, Doc. 212-1.).

On February 23, 2011, the Court conditionally certified a nationwide class under the FLSA based solely on Defendants' timekeeping and rounding policies. (Doc. 109.) The Court also certified a class under Plaintiff's state law claims for failure to pay straight-time wages, failure to pay overtime wages, failure to pay all compensation due and owing at termination, failure to provide accurate wage statements, and violation of California Business & Professions Code § 17200, et seq. (Id.) Plaintiff's other claims were not certified and are retained by her in her individual capacity. (Id.)

On March 23, 2012, the Court granted in part and denied in part Defendants' motion for partial summary judgment. (Doc. 202.) The Court granted summary judgment against claims arising from the rounding system that was in place after July 19, 2008, and denied summary judgment on claims arising from the timekeeping system between March 10, 2006, to July 18, 2008, and also denied the motion as to the claim for failure to timely pay wages due at termination pursuant to California Labor Code § 203. (Id.) Plaintiff then filed the instant Motion on September 18, 2012.

Terms of the Settlement Agreement

Defendants have agreed to pay $600,000 as the total settlement fund ("Settlement Fund"), without admitting any liability, and to deposit the money with a settlement administrator following approval.*fn1 (Jason M. Lindner Decl. ("Lindner Decl. II") Ex. A ("Settlement Agreement") ¶ 45, Doc. 216-2.) Class Members are to be given notice of the Settlement, including an estimate of their recovery, and they have 45 days from the time of the initial mailing of the Class Notice to opt-out of the settlement. (Settlement Agreement

¶¶ 48-51.) Each Class Member who does not opt out will receive a cash payment, with a minimum payment of $25. (Id. ¶ 45(d)(v).) Each Class Member's share of the Settlement is based on a pro rata share of the funds based on that Class Member's time worked within the relevant time period, his or her rate of pay, and multipliers including whether he or she worked in California, whether he or she opted in to the FLSA claim, and his or her standing as a terminated employee within the applicable statute of limitations period to maintain a claim for penalties under California Labor Code § 203. (Id. ¶ 45(d).)

The Settlement further provides that funds remaining after distribution to Class Members-including checks uncashed after 320 days and checks returned as undeliverable-are to be distributed in cy pres to the Legal Aid Society-Employment Law Center. (Id. ¶ 45(e).)

Under the Settlement, Plaintiff's counsel may apply for up to one-third of the Settlement Fund (i.e., $200,000), and Defendants agree to not oppose such a motion. (Id. ¶ 45(a).) Plaintiff's counsel also has the right to seek an "enhancement award" of up to $6,000 for Plaintiff Shaunetta Eddings, based on her service as class representative and in consideration for her execution of a general release. (Id. ¶ 45(b).)

Class Members who do not opt-out agree to release Defendants from liability for all claims related to rounding of time, including self-rounding, during the period before July 18, 2008 for unpaid wages, excluding the FLSA claims of Class Members who did not affirmatively opt-in to this lawsuit. (Id. ¶ 43(a).)

III. PRELIMINARY APPROVAL OF THE PROPOSED SETTLEMENT

Rule 23(e)(2) requires the Court to determine whether the proposed settlement is fair, reasonable, and adequate. Fed. R. Civ. P. 23(e)(2). In turn, review of a proposed settlement typically proceeds in two stages, with preliminary approval followed by a final fairness hearing. Federal Judicial Center, Manual for Complex Litigation, § 21.632 (4th ed. 2004).

To determine whether a settlement agreement is fair, adequate, and reasonable, "a district court must [ultimately] consider a number of factors, including: the strength of 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;*fn2 and the reaction of the class members to the proposed settlement." Staton v. Boeing Co., 327 F.3d 938, 959 (9th Cir. 2003) (internal citation and quotation marks omitted). "The relative degree of importance to be attached to any particular factor will depend upon and be dictated by the nature of the claims advanced, the types of relief sought, and the unique facts and circumstances presented by each individual case." Officers for Justice v. Civil Serv. Comm'n, 688 F.2d 615, 625 (9th Cir. 1982). "It is the settlement taken as a whole, rather than the individual component parts, that must be examined for overall fairness, and the settlement must stand or fall in its entirety." Staton, 327 F.3d at 960 (quoting Hanlon v. Chrysler Corp., 150 F.3d 1011, 1026 (9th Cir. 1998) (internal quotation marks omitted)).

Moreover, at this preliminary stage and because class members will receive an opportunity to be heard on the settlement, "a full fairness analysis is unnecessary . . . ." Alberto v. GMRI, Inc., 252 F.R.D. 652, 665 (E.D. Cal. 2008) (internal quotation marks omitted). Instead, preliminary approval and notice of the settlement terms to the proposed class are appropriate where "[1] the proposed settlement appears to be the product of serious, informed, non-collusive negotiations, [2] has no obvious deficiencies, [3] does not improperly grant preferential treatment to class representatives or segments of the class, and [4] falls with the range of possible approval . . . ." In re Tableware Antitrust Litig., 484 F. Supp. 2d 1078, 1079 (N.D. Cal.2007) (internal quotation and citation omitted) (emphasis added); see also Acosta v. Trans Union, LLC, 243 F.R.D. 377, 386 (C.D. Cal. 2007) ("To determine whether preliminary approval is appropriate, the settlement need only be potentially fair, as the Court will make a final determination of its adequacy at the hearing on Final Approval, after such time as any party has had a chance to object and/or opt out.") (emphasis in original).

In any event, the Court evaluates all applicable factors below and finds that the Settlement Agreement should be preliminarily approved.

A.Arms-length Negotiations

The parties participated in a mediation session on June 23, 2011, with Michael J. Loeb, Esq. (Lindner Decl. ("Lindner Decl I") ¶ 2, Doc. 212-2; Memo. at 2-3.) While the parties did not reach a settlement at that time, Mr. Loeb "has been continually involved in facilitating settlement discussions" and ultimately helped the parties reach a resolution. (Memo. at 2.) Moreover, this case has been vigorously litigated, culminating in a ruling on a dispositive motion. At this point, the Court is satisfied that the Settlement Agreement is the result of sufficient arms-length, noncollusive, and informed negotiations.

B.Strength of Plaintiff's Case and the Amount Offered in Settlement

Plaintiff notes that, although she believes her case has serious merit, significant risks are inherent in trials. (Memo. at 10.) Indeed, Plaintiff argues that a "wage and hour class action involving analysis of timekeeping systems is complex in and of itself, and such complexity adds to the risk of confusion if this case were to be tried in front of a jury." (Id.) Defendants have shown that they are committed to thoroughly litigating this case. Thus, at this point, the proposed settlement strikes a balance between Plaintiffs' claims and Defendants' defenses. The Court concludes that the parties' decision to reach a settlement in this matter was reasonable.

When compared to the strength (and weaknesses) of Plaintiff's case, the Court finds that the settlement amount of $600,000 is fair, adequate, and reasonable under the circumstances. Considering the present value of the settlement amount, the probability of further expensive litigation in the absence of settlement, the risk that Plaintiff and the class would not have succeeded at trial, and the risk that the jury might award lesser damages, the Court finds the settlement amount for disbursement to class members within the range of reasonableness.

Relatedly, the Court finds the plan of allocation of the settlement funds to be reasonable. In re Citric Acid Antitrust Litig., 145 F. Supp. 2d 1152, 1154 (N.D. Cal. 2001) ("Approval of a plan for the allocation of a class settlement fund is governed by the same legal standards that are applicable to approval of the settlement: the distribution plan must be 'fair, reasonable and adequate.'") (citation omitted). Here, the division of the funds between the participating class members based on time worked, pay rate, and multipliers including whether they worked in California appears reasonable.

At present, Plaintiff has not made a sufficient showing as to attorneys' fees by the submitted declaration. Plaintiff's counsel's declaration makes no representation as to hours worked or billing rates. Moreover, Plaintiff's counsel seeks one-third of the total settlement amount in fees even though 25% of the common fund is a benchmark for fees in the Ninth Circuit. See, e.g., Hanlon, 150 F.3d at 1029 ("This circuit has established 25% of the common fund as the benchmark award for attorney fees."). While Plaintiff's counsel has provided authorities approving 33% in wage-and-hour cases, Plaintiff's counsel will have to provide evidence to justify an upward departure from the Ninth Circuit's fees benchmark. The Court also notes that there is no reason to suspect Hanlon's 25% benchmark is outdated. See In re Bluetooth Headset Prods. Liab. Litig., 654 F.3d 935, 942 (9th Cir. 2011) ("Where a settlement produces a common fund for the benefit of the entire class, . . . . courts typically calculate 25% of the fund as the 'benchmark' for a reasonable fee award, providing adequate explanation in the record for any 'special circumstances' justifying a departure.") (emphasis added). An application for a service award for Eddings will similarly need to be supported by evidence justifying the amount sought. In short, as part of the motion for attorneys' fees and other related costs, the parties must provide the Court with more detailed documentation as to fees, actual litigation expenses and settlement administration costs incurred, and any updated information as to Plaintiff's continued participation in the settlement process pertinent to the service award.

The amount of the settlement also appears fair, adequate, and reasonable in light of the claims released by the participating class members and those class members who fail to exclude themselves from the Settlement Agreement. The proposed agreement will release class members' wage and hour claims only as they relate to rounding of time, and will not release all potential employment claims.*fn3 (See Settlement Agreement ¶ 43(a).) In addition, the Settlement Agreement ensures that only participating class members will release any potential FLSA claims against Defendants. (Id.)

The cy pres distributions also appear to be appropriate. Pursuant to the Settlement Agreement, any funds remaining after distribution to class members are to be distributed in cy pres to the Legal Aid Society-Employment Law Center. (Settlement Agreement ¶ 45(e).) Similarly, any funds remaining from the $55,000 allocated to cover the Settlement Administrator's costs are also set to be distributed in cy pres to the Legal Aid Society-Employment Law Center. (Id. ¶ 45(c).) The Ninth Circuit has established clear standards on cy pres distributions in class-action settlements. "Not just any worthy recipient can qualify as an appropriate cy pres beneficiary." Dennis v. Kellogg Co., 697 F.3d 858, 865 (9th Cir. 2012). Instead there must be "a driving nexus between the plaintiff class and the cy pres beneficiaries." Id. (quoting Nachsin v. AOL, LLC, 663 F.3d 1034, 1038 (9th Cir. 2011).). "A cy pres award must be guided by (1) the objectives of the underlying statute(s) and (2) the interests of the silent class members, and must not benefit a group too remote from the plaintiff's class." Id. (internal citations and quotation marks omitted).

The class action in Dennis involved alleged false advertising by Kellogg in violation of California's Unfair Competition Law and Consumer Legal Remedies Act. As part of the settlement, Kellogg agreed to distribute $5 million in food to charities dedicated to feeding the hungry. The court noted that "[t]his noble goal [of feeding the hungry], however, has little or nothing to do with the purposes of the underlying lawsuit or the class of plaintiffs involved." Id. at 866 (internal citation and quotation marks omitted). The court continued: "Thus, appropriate cy pres recipients are not charities that feed the needy, but organizations dedicated to protecting consumers from, or redressing injuries caused by, false advertising." Id. at 867.

Accordingly, in the instant case, an appropriate charity is one that is "dedicated to protecting [workers] from, or redressing injuries caused by," violations of labor laws. The Legal Aid Society -- Employment Law Center ("LAS-ELC") has as its mission "promot[ing] the stability of low-income and disadvantaged workers" by "[u]sing the law as a tool." (Linder Decl. Ex. B (excerpts from LAS-ELC's website), Doc. 216-3.) The LAS-ELC has, inter alia, a Wage and Hour Program that works "to ensure that all workers benefit from laws that regulate pay and work hours." (Id.) Moreover, the "Program's goal is to educate workers about their wage-and-hour rights." (Id.) The Program provides information to workers through "fact sheets, self-help guides, presentations, and legal advice," and the group "helps protect workers from unlawful practices by providing them with the tools to advocate on their own behalf." (Id.) Finally, the LAS-ELC engages in class-action litigation on behalf of workers with wage claims in both state and federal courts. (Id.) The Legal Aid Society -- Employment Law Center is a suitable cy pres recipient in this case.

C.Likely Expense and Duration of Further Litigation

The next stage of this litigation is the last-trial. Thus, if settlement were not reached, Plaintiff and class members would likely incur additional costs in preparing for and participating in trial. The Court finds that this factor favors preliminary approval of the Settlement Agreement.

D.Extent of Discovery Completed

This factor requires the Court to evaluate whether "the parties have sufficient information to make an informed decision about settlement." Linney v. Cellular Alaska P'ship, 151 F.3d 1234, 1239 (9th Cir. 1998). In this case, discovery has been completed- indeed, a dispositive motion was brought. Plaintiff's counsel represents that the parties engaged in "significant analysis" of the data Defendants produced, and that Plaintiff's counsel has analyzed the payroll and timekeeping data. (Lindner Decl. I ¶ 3.) Plaintiff also argues that the because the operation of the rounding system at issue is largely mechanical, "the data has lent itself to a fair estimation of the Class Members' claims." (Memo. at 9.) As a result, the Court finds that this factor favors preliminarily approving the Settlement Agreement.

E.Risk of Maintaining Class Certification

Although Plaintiff makes passing reference to Defendants' vigorous defense of this case on the merits, the parties do not provide the Court with any specific risks of maintaining class certification throughout the litigation. Hence, the Court need not consider this factor for settlement purposes. See In re Veritas Software Corp. Sec. Litig., No. C-03-0283 MMC, 2005 WL 3096079, at *5 (N.D. Cal. Nov. 15, 2005) (favoring neither approval nor disapproval of settlement where the court was "unaware of any risk involved in maintaining class action status"), aff'd in relevant part, 496 F.3d 962 (9th Cir. 2007); Murillo v. Pac. Gas & Elec. Co.,No. CIV. 2:08-1974 WBS GGH, 2010 WL 2889728, at *7 (E.D. Cal. July 21, 2010) (favoring neither approval nor disapproval of settlement where the court was "unaware of any specific difficulty in maintaining class-action status were [the] case to continue to trial").

F.Experience and Views of Counsel

Plaintiff's counsel have experience serving as plaintiff's counsel in class actions, and they and Defendants' counsel have fully endorsed the Settlement Agreement as fair, reasonable, and adequate. (Memo. at 1; Defs.' Notice Non-Opp'n at 1, Doc. 214.) This factor weighs in favor of preliminarily approving the Settlement Agreement.

G.Reaction of Class Members to Proposed Settlement

As of yet, Plaintiff provides no evidence regarding class members' reaction to the proposed settlement. However, the Court recognizes that the lack of such evidence is not uncommon at the preliminary approval stage. Prior to the fairness hearing, Plaintiff's counsel shall submit a sufficient number of declarations from class members discussing their reactions to the proposed settlement, as well as a declaration from Plaintiff setting forth her reaction to the settlement.

IV.PRELIMINARY APPROVAL OF CLASS NOTICE FORM AND METHOD

For a class certified under Rule 23(b)(3), "the court must direct to class members the best notice that is practicable under the circumstances, including individual notice to all members who can be identified through reasonable effort." Fed. R. Civ. P. 23(c)(2)(B). However, actual notice is not required. See Silber v. Mabon, 18 F.3d 1449, 1454 (9th Cir. 1994).

The Settlement Agreement requires that, within thirty days of entry of the preliminary approval order, Defendants will provide (in an encrypted format) the Settlement Administrator with a list of Class Members, which identifies each Class Members' Social Security number, last-known address, and the dates of his or her employment as a Class Member during the Class Period. (Settlement Agreement ¶ 48.) Within twenty days of receiving that list, the Settlement Administrator will mail the Class Notice. (Id. ¶ 48(a).) The Settlement Administrator will use "skip tracing" and National Change of Address searches. (Id.¶ 48(c).) Additionally, the Settlement Administrator will re-mail any Class Notice returned with a forwarding address. (Id. ¶ 48(b).) Notice by mail has been found by the Supreme Court to be sufficient if the notice is "reasonably calculated . . . to apprise interested parties of the pendency of the action and afford them an opportunity to present their objections." Mullane v. Cent. Hanover Bank & Trust Co., 339 U.S. 306, 314 (1950). Accord Sullivan v. Am. Express Publ'g Corp., No. SACV 09-142-JST (ANx), 2011 WL 2600702, at *8 (C.D. Cal. June 30, 2011) (quoting Mullane).

Plaintiff has provided the Court with a copy of the revised proposed notice. (Settlement Agreement, Ex. A.) Under Rule 23, the notice must include, in a manner that is understandable to potential class members, "(i) the nature of the action; (ii) the definition of the class certified; (iii) the class claims, issues, or defenses; (iv) that a class member may enter 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 and manner for requesting exclusion; and (vii) the binding effect of a class judgment on members under Rule 23(c)(3)." Fed. R. Civ. P. 23(c)(2)(B). The proposed notice includes this necessary information. (See Settlement Agreement Ex A.)

The Court requires the Notice to be modified as follows:

(1) The following sentence should be added after the second sentence of numbered Section 4 on the third page of the Notice: "Class Counsel will file their motion for such attorney's fees, costs, and service enhancement for the Named Plaintiff no later than 15 days before the date by which you must opt out of the settlement or object to the settlement's terms." See In re Mercury Interactive Corp. Sec. Litig., 618 F.3d 988, 994-95 (9th Cir. 2010) (holding that district court must set a settlement schedule that provides the class an adequate opportunity to review and prepare objections to class counsel's completed fee motion).

(2) In Section 9, the Notice should state that the Motion for Attorneys' Fees, Litigation Costs and Expenses, and Class Representative's Enhancement Award will be available for review as part of the Court's files in this matter at the Office of the Clerk of Court or via PACER.

The parties must provide the Court within 10 days of this order an updated copy of the Notice reflecting the changes identified above.

Finally, the Court requires that the Motion for Final Approval of the Settlement and Motion for Attorneys' Fees, Litigation Costs and Expenses, and Class Representative's Enhancement Award be filed with the Court no later than 15 days before the time for Class Members to object or seek exclusion. In addition, the parties are required to file with the Court a brief responding to any submitted objections and otherwise summarizing the class members' participation in the Settlement and the settlement administration to date no later than 15 days after the expiration of the time for Class Members to object or seek exclusion.

In their papers for final approval of the settlement, the parties must include a declaration reflecting that they provided appropriate notice of the proposed settlement to relevant state and federal authorities per the terms of 28 U.S.C. § 1715(b) at least 90 days prior to the date for the final fairness hearing. 28 U.S.C. § 1715(d). True v. Am. Honda Motor Co., 749 F. Supp. 2d 1052, 1059 n.5 (C.D. Cal. 2010) (recognizing that the Class Action Fairness Act "requires that notice [of a proposed settlement] be sent to 'the appropriate State official of each State in which a class member resides and the appropriate Federal official.'" (quoting 28 U.S.C § 1715(b)).

V.CONCLUSION

Accordingly, the Court preliminarily approves the Settlement Agreement and approves the form and method of class notice with the modifications outlined in this order.*fn4

The Court therefore sets the following schedule:

* Deadline to provide Class Member information to Settlement Administrator: 30 calendar days from entry of the preliminary approval Order;

* Deadline to disseminate Class Notice: 50 calendar days from entry of the preliminary approval Order;

* Filing of Motion for Attorney's Fees and Costs and Service Payment: 30 calendar days from mailing of Class Notice;

* Deadline for Class members to file objections, if any, or to opt out of the Settlement: 45 calendar days from mailing of Class Notice;

* Filing of Motion for Final Approval and a brief in response to any objections by Class members, which also summarizes the settlement administration to date: 60 calendar days from mailing of Class Notice;

* Final Approval Hearing: May 31, 2013, at 2:30 p.m.

This preliminary approval order is also conditioned upon the parties providing the Court within 10 days of this Order an updated copy of the Notice and related forms reflecting the changes identified above.

The Court reserves the right to continue the date of the fairness hearing without further notice to class members. The Court retains jurisdiction to consider all further applications arising out of or in connection with the Settlement Agreement.


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