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Priyanka Khanna v. Inter-Con Security Systems

March 21, 2013



The court has considered plaintiff's renewed request for an order granting preliminary approval a proposed class and collective action settlement and, for the reasons stated below, GRANTS the request.

I. Background

On August 11, 2009, plaintiff Shashi Khanna, suing individually and as successor in interest of Amankumar Khanna, and all others similarly situated, filed a complaint against Inter-Con Security Systems, Inc., d/b/a Healthcare Security Services Group, and Enrique Hernandez, Neil Martau, Lance Mueller, Roland Hernandez, Paul Miller, Michael Marcharg, Jeanne Gervin, Michale Sutkaytis, Jana Fanning, Brittany Moore, Catherine Ross, Linda Saayad, Mark Chamberlin, and James Latham. She alleged generally that her deceased husband, Amankumar Khanna, was employed as a security guard by defendant Inter-Con Security Services (Inter-con), also doing business as Healthcare Security Services Group (HSSG), to provide security services to defendants' customers, including Kaiser Foundation Hospitals and the State of California. ECF No. 1 ¶¶ 8-9. Inter-con required Khanna and others in his position to work more than eight hours a day or forty hours a week without overtime compensation under the pretense that HSSG was a separate entity and so any hours attributed to HSSC were not overtime as to Inter-con. Id. ¶¶ 11-12. The complaint contained six causes of action: (1) violation of the Fair Labor Standards Act (FLSA), 29 U.S.C. § 201, et seq., for failure to pay overtime wages; (2) violation of California Labor Code §§ 218.6, 510, 511, 558, 1194, 1198 and 1199 for failure to pay overtime wages; (3) violation of California Labor Code §§ 201, 202, 203, 204, 1194 and 1199 for failure to pay full wages when due; (4) violation of California Labor Code §§ 226, 226.3, 1174 and 1174.5 for failure to adhere to California law regarding accurate wage statements; (5) violation of California Business and Professions Code § 17200 (UCL), unfair business practices stemming from defendants' failure to pay legally required wages, to pay wages when due and to provide itemized statements of hours worked; and (6) a claim under California's Private Attorneys' General Act (PAGA), California Labor Code § 2699.3, based on the previously described Labor Code violations. Plaintiff also sought certification of the case as an FLSA collective action and a class action for the state claims.

Defendants filed a motion to dismiss or to strike portions of the second, third, fourth, fifth and sixth causes of action and some of the claims for relief. ECF No. 22. Specifically defendants asked the court to strike the class action allegations on the ground that plaintiff, as successor in interest to her husband's claim, was not an adequate class representative. It also sought to strike the collective action allegations on the ground that plaintiff is not similarly situated to actual employees. It asked the court to dismiss plaintiff's attempt to recover civil penalties under PAGA, and the claims for injunctive relief and for violation of California Business and Professions Code § 17200. The court granted defendant's motion to dismiss plaintiff's claim for injunctive relief, finding that she lacked standing and that her PAGA claim, finding that a right to bring suit under those provisions was not assignable and so did not survive Mr. Khanna's death. The court otherwise denied the motion. ECF No. 31.

On August 3, 2010, the court granted plaintiff's unopposed request to substitute as plaintiff Priyanka Khanna, daughter of Amankumar and Shashi Khanna, in light of the death of Shashi Khanna. ECF No. 43.

On June 27, 2011, plaintiff filed a new motion seeking (1) appointment of class counsel, (2) preliminary certification of the class and the collective action, and (3) preliminary approval of a settlement. ECF No. 52.

The court approved the appointment of class counsel and certified the class and collective action. It declined preliminary approval of the proposed settlement because the materials submitted did not provide sufficient information about the potential range of recovery or about the proposal to surrender claims relating to meals and rest breaks so as to allow the court to determine whether the proposed settlement was fair. The court also questioned why a portion of the FLSA settlement would revert to Inter-Con. In addition, it requested further information about class counsel's fee request, the justification for the class representative's incentive payment, and the selection of CPT as claims administrator. Finally, the court found the proposed notice confusing and inadequate in several respects. See ECF 58. Plaintiff has now provided additional information about the proposed settlement as well as a redesigned notice to class members.

II. The Settlement

When the parties reach settlement before class certification, the court cannot simply accept the parties' resolution but must also satisfy itself that the proposed settlement is "fundamentally fair, adequate, and reasonable." Hanlon v. Chrysler Corp., 150 F.3d 1011, 1026 (9th Cir. 1998); Staton v. Boeing, 327 F.3d 938, 952 (9th Cir. 2003). In making this determination, the court should consider the strength of the plaintiffs' case; the likely duration and complexity of further litigation; the risk of maintaining class status through trial, the amount offered in settlement, the stage of the proceedings; and counsel's views. Lane v. Facebook, Inc., 696 F.3d 811, 819 (9th Cir. 2012). Similar considerations guide the evaluation of the settlement of the FLSA collective action: the court must insure that "'the settlement is a fair and reasonable resolution of a bona fide dispute.'" Lewis v. Vision Value, LLC., No. 1:11-cv-01055 LJO-BAM, 2012 WL 2930867, at *2 (E.D. Cal. July 18, 2012) (quoting Yue Zhou v. Wang's Restaurant, No. C 05-0279 PVT, 2007 WL 2298046 (N.D. Cal. Aug. 8, 2007)). Courts often apply the Rule 23 factors in evaluating the fairness of an FLSA settlement, while recognizing that some do not apply "because of the inherent differences between class actions and FLSA actions." Almodova v. City and County of Honolulu, Civil No. 07-00378 DAE-LEK, 2010 WL 1372298, at *4 (D. Haw. Mar. 31, 2010), recommendation adopted by 2010 WL 1644971 (D. Haw. Apr 20, 2010).

In very basic terms, the proposed settlement requires defendants to pay a maximum of $390,000, which will cover payments to class members, Khanna's class representative payment, counsel's fees and costs, employer payroll taxes on amounts characterized as wages, and the claims administrator's fees and costs.

A. The Potential Range of Recovery

In response to the court's concern that it could not evaluate the fairness of the proposed settlement without information about the potential range of recovery, counsel has now presented the declarations of Bridget Sanders, a forensic accountant, and of counsel Jeffrey Edwards, both of whom address the potential range of recovery should the case proceed to trial. ECF Nos. 59-3, 59-1. Edwards avers that Inter-Con provided electronic spreadsheets reflecting hours worked for both Inter-Con and HSSG between July 23, 2005 and March 8, 2009, along with average pay rates and total amounts paid to class members per pay period and that counsel verified the information by comparing it with original source evidence for specific lines of data for several class members provided and authenticated by Inter-Con. Decl. of Jeffrey Edwards, ECF No. 59-1 ¶¶ 10, 12.

Counsel provided this information to Sanders, who prepared a model displaying each class member's hours at each worksite per day, the average pay rate on that day, and the total paid to the class member for that day and, from this information, identified employees who had worked excess hours without overtime compensation. Decl. of Bridget Sanders, ECF No. 59-3 ¶ 9. She then used multipliers to calculate liability for California and FLSA overtime, and determined the liability for California overtime for August 11, 2005 through August 11, 2009 is no more than $443,830. She calculated FLSA overtime from August 11, 2007 through August 11, 2009 to be approximately $98,656.72, and $197,313.44 if multiplied by two for liquidated damages; for the period of August 11, 2006 through March 9, 2009, the FLSA overtime amounts are $207,234.02 and $414,690.04, respectively. ECF No. 59-3 ¶¶ 13-14. She also determined the amount for unpaid second meal breaks from August 11, 2006 through March 8, 2009 to be $16,231.77. Id. ¶ 16. Sanders calculated California overtime for March 1, 2008 through March 1, 2009 as $48,907.10, FLSA overtime for the same period to be $56,691.58 and unpaid second meal breaks for this time to be $3,589.38. ECF No. 59-3 ¶¶ 18-20.

Edwards represents that Inter-Con contends that if plaintiffs establish liability, the maximum recoverable amount for overtime is $144,776 and if a portion of the claims are barred by the release in Adams v. Inter-Con Security Systems, Inc., 3:06-cv-05428 N.P. (N.D. ...

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