United States District Court, E.D. California
KIMBERLY J. MUELLER, District Judge.
The court heard argument on plaintiff's unopposed motion for an order preliminarily approving a class settlement and provisionally certifying the settlement class on June 20, 2014. Mark Thomas and Frank Moore appeared for plaintiff. Counsel for defendant did not appear. After carefully considering the parties' submissions and the applicable law, the court GRANTS plaintiffs' motion for the reasons set forth below.
I. FACTUAL AND PROCEDURAL BACKGROUND
This case arises from defendant's alleged improper classification of plaintiff and other employees as exempt under the Fair Labor Standards Act ("FLSA"), the California Labor Code, and California Industrial Welfare Commission order provisions.
On February 6, 2013, plaintiff initiated this action by filing an individual complaint for damages against defendant. ECF No. 1. On April 2, 2013, before defendant filed an answer, plaintiff filed a first amended complaint. ECF No. 6. Defendant answered on April 24, 2013. ECF No. 8. On September 4, 2013, plaintiff moved the court to file a second amended complaint to allege class claims. ECF No. 16. The court granted plaintiff's motion on October 24, 2013, and plaintiff's second amended complaint, captioned as a class action complaint, was deemed filed on that date. ECF No. 19. On November 13, 2013, defendant answered the second amended complaint. ECF No. 21.
The second amended complaint alleges as follows. Because of their exempt status, plaintiff and other similarly situated employees were not compensated for overtime work performed in excess of forty hours in a week and in excess of eight hours in a day, and were denied meal and break periods. Second Am. Compl. ("SAC") ¶ 18, ECF No. 20. Defendant failed to maintain records showing the daily hours worked by plaintiff and class members, and failed to provide itemized statements showing all hours worked. Id. Defendant failed to provide plaintiff and the class meal period and rest period breaks. Id. ¶¶ 19-20. Plaintiff brings nine separate claims for relief: (1) unlawful failure to pay overtime compensation in violation of FLSA; (2) unlawful failure to pay overtime compensation in violation of the California Labor Code; (3) failure to provide itemized statements of hours and wages in violation of the California Labor Code; (4) failure to provide meal period breaks in violation of the California Labor Code; (5) failure to provide rest period breaks in violation of the California Labor Code; (6) failure to pay waiting time penalties in violation of the California Labor Code; (7) unfair and unlawful business practices under the California Business & Professions Code; (8) recovery of penalties under the Labor Code Private Attorneys General Act; and (9) declaratory relief. SAC at 8-20.
On May 16, 2014, following the parties' participation in mediation, plaintiff filed a motion for preliminary approval of class action settlement. ECF No. 22.
II. STANDARDS AND PROCESS FOR CLASS SETTLEMENT APPROVAL
"Courts have long recognized that settlement class actions present unique due process concerns for absent class members.'" In re Bluetooth Headset Prods. Liab. Litig. ( Bluetooth ), 654 F.3d 935, 946 (9th Cir. 2011) (quoting Hanlon v. Chrysler Corp., 150 F.3d 1011, 1026 (9th Cir. 1998)). To protect absent class members' due process rights, Rule 23(e) of the Federal Rules of Civil Procedure permits a class action to be settled "only with the court's approval" "after a hearing and on a finding" the agreement is "fair, reasonable, and adequate." Moreover, if "the settlement agreement is negotiated prior to formal class certification, '" then "there is an even greater potential for a breach of fiduciary duty owed the class.'" Radcliffe v. Experian Info. Solutions Inc., 715 F.3d 1157, 1168 (9th Cir. 2013) (alteration omitted) (emphasis omitted) (quoting Bluetooth, 654 F.3d at 946). "Accordingly, such agreements must withstand an even higher level of scrutiny for evidence of collusion or other conflicts than is ordinarily required under Rule 23(e) before securing the court's approval as fair." Bluetooth, 654 F.3d at 946 (citations omitted). "Judicial review must be exacting and thorough." MANUAL FOR COMPLEX LITIGATION (FOURTH) § 21.61 (2004).
"Review of a proposed class action settlement generally involves two hearings." Id. § 21.632. First, the parties submit the proposed terms of the settlement so the court can make "a preliminary fairness evaluation, " and if the parties move "for both class certification and settlement approval, the certification hearing and preliminary fairness evaluation can usually be combined." Id. Then, "[t]he 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 the date of the final fairness hearing." Id. After the initial certification and notice to the class, the court then conducts a second fairness hearing before finally approving any proposed settlement. Narouz v. Charter Commc'ns, LLC, 591 F.3d 1261, 1267 (9th Cir. 2010).
Regarding class certification, the parties' stipulation that the class should be certified is not sufficient; instead the court must pay "undiluted, even heightened, attention" to class certification requirements. Amchem Prods., Inc. v. Windsor, 521 U.S. 591, 620 (1997); but see NEWBERG ON CLASS ACTIONS § 11:28 (4th ed.) ("Since Amchem, approval of settlement classes is generally routine and courts are fairly forgiving of problems that might hinder class certification were the case not to be settled." (collecting cases)). Regarding notice to the class, the court must ensure the class members "receive the best notice that is practicable under the circumstances.'" Wal-Mart Stores, Inc. v. Dukes, 131 S.Ct. 2541, 2558 (2011) (quoting FED. R. CIV. P. 23(c)(2)(B)).
A. Class Certification
Plaintiff seeks certification of the following class for settlement purposes:
[T]he 28 employees identified as Inventory Specialists who were misclassified as exempt employees by Bar None at any time from February 1, 2009 through February 28, 2013, and who have not opted out of this Settlement after Notice, and who are therefore in the Class that is certified for purposes of Settlement only.
Pl.'s Mot. Prelim. Approval Class Settlement ("Mot.") at 7, ECF No. 22-1. "The class excludes individuals who cannot be located by the Claims Administrator." Id.
A party seeking to certify a class must demonstrate that it has met the requirements of Rule 23(a) and at least one of the requirements of Rule 23(b). Amchem, 521 U.S. at 614; Ellis v. Costco Wholesale Corp., 657 F.3d 970, 979-80 (9th Cir. 2011). Although the parties in this case have stipulated that a class exists for purposes of settlement, the court must nevertheless undertake the Rule 23 inquiry independently, both at this stage and at the later fairness hearing. West v. Circle K Stores, Inc., No. CIV. S-04-0438 WBS GGH, 2006 WL 1652598, at *2 (E.D. Cal. June 13, 2006).
Under Rule 23(a), before certifying a class, the court must be satisfied that:
(1) the class is so numerous that joinder of all members is impracticable (the "numerosity" requirement); (2) there are questions of law or fact common to the class (the "commonality" requirement); (3) the claims or defenses of representative parties are typical of the claims or defenses of the class (the "typicality" requirement); and (4) the representative parties will fairly and adequately protect the interests of the class (the "adequacy of representation" requirement).
Collins v. Cargill Meat Solutions Corp., 274 F.R.D. 294, 300 (E.D. Cal. 2011) (quoting In re Itel Sec. Litig., 89 F.R.D. 104, 108 (N.D. Cal. 1981)); accord FED. R. CIV. P. 23(a).
The court must also determine whether the proposed class satisfies Rule 23(b)(3), on which plaintiffs rely in this action. To meet the requirements of this subdivision of the rule, the court must find "questions of law or fact common to class members predominate over any questions affecting only individual members, and that a class action is superior to other available methods for fairly and effectively adjudicating the controversy.'" Dukes, 131 S.Ct. at 2558 (quoting FED. R. CIV. P. 23(b)(3)). "The matters pertinent to these findings include: (A) the class members' interests in individually controlling the prosecution or defense of separate actions; [and] (B) the extent and nature of any litigation concerning the controversy already begun by or against class members...." FED. R. CIV. P. 23(b)(3)(A)-(B).
Although there is no absolute numerical threshold for numerosity, courts have approved classes consisting of thirty-nine, sixty-four and seventy-one plaintiffs. Murillo v. Pac. Gas & Elec. Co., 266 F.R.D. 468, 474 (E.D. Cal. 2010) (citing Jordan v. L.A. Cnty., 669 F.2d 1311, 1319 (9th Cir. 1982), vacated on other grounds, 459 U.S. 810). Plaintiff states the potential class consists of twenty-eight "Inventory Specialists employed by [defendant] between from [sic] February 1, 2009 through February 28, 2013." Mot. at 19. When a class size is small, courts consider factors such as "the geographical diversity of class members, the ability of individual claimants to institute separate suits, and whether injunctive or declaratory relief is sought." Jordan, 669 F.2d at 1319. While plaintiff did not specifically address these factors, plaintiff explains in his motion that "[a]bsent a class action, most members of the class would find the cost of litigating their claims to be prohibitive, and such multiple individual actions would be judicially inefficient." Mot. at 21. The cost to potential class members of litigating an individual action and the judicial efficiency of addressing class claims in one action weighs in favor of class certification. See, e.g., McCluskey v. Trs. of Red Dot Corp. Emp. Stock Ownership Plan & Trust, 268 F.R.D. 670, 673-76 (W.D. Wash. 2010) (finding numerosity satisfied for class of twenty-seven members after considering several factors including judicial economy and the ability of the members to file individual suits). Accordingly, the numerosity requirement has been met.
To satisfy the commonality requirement, plaintiffs must do more than show "they have all suffered a violation of the same provision of law." Dukes, 131 S.Ct. at 2551. The claims must depend upon a common contention that "must be of such a nature that it is capable of classwide resolution-which means that determination of its truth or falsity will resolve an issue that is central to the validity of each one of those claims in one stroke." Id. It is not so much that the class raises common questions: what is necessary is "the capacity of a classwide proceeding to generate common answers....'" Id. (emphasis omitted) (quoting Richard A. Nagareda, Class Certification in the Age of Aggregate Proof, 84 N.Y.U. L. REV. 97, 132 (2009)). "[T]he merits of the class members' substantive claims are often highly relevant when determining whether to certify a class." Ellis, 657 F.3d at 981.
Here, plaintiff states the common question shared by potential class members is whether they were misclassified as exempt employees, were not compensated for overtime, did not receive rest and meal breaks, did not accrue vacation pay and did not receive timely pay wages upon termination. Mot. at 20. All the potential class members were employed by defendant as Inventory Specialists and were allegedly misclassified as exempt. Id. If the classification is unlawful, each class member will have been injured by defendant's conduct. This satisfies the requirement that plaintiff's claims "depend upon a common contention... [that is] of such a nature that it is capable of classwide resolution." Dukes, 131 S.Ct. at 2551. Accordingly, the commonality requirement has been met.
"[T]he commonality and typicality requirements of Rule 23(a) tend to merge'" because both act "as guideposts for determining whether under the particular circumstances maintenance of a class action is economical and whether the named plaintiff's claim and the class claims are so interrelated that the interests of the class members will be fairly and adequately protected in their absence.'" Dukes, 131 S.Ct. at 2551 n.5 (quoting Gen. Tel. Co. of Sw. v. Falcon, 457 U.S. 147, 157-58 n.13 (1982)). A court resolves the typicality inquiry by considering "whether other members have the same or similar injury, whether the action is based on conduct which is not unique to the named plaintiffs, and whether other class members have been injured by the same course of conduct." Ellis, 657 F.3d at 984 (internal quotations and citation omitted); Morales v. Stevco, Inc., No. 1:09-cv-00704 AWI JLT, 2011 WL 5511767, at *6 (E.D. Cal. Nov. 10, 2011). In this case, the potential class members had similar job duties, were similarly misclassified as exempt employees and received compensation under the same pay practices. This satisfies the typicality inquiry. See Murillo, 266 F.R.D. at 475.
4. Adequacy of Representation
To determine whether the named plaintiff will protect the interests of the class, the court must explore two factors: (1) do the named plaintiff and his counsel have any conflicts of interest with the class as a whole, and (2) have the named plaintiff and counsel vigorously pursued the action on behalf of the class. Hanlon, 150 F.3d at 1020 (citation omitted); see also True v. Am. Honda Motor Co., Inc., No. EDCV 07-287-VAP (OPx), 2009 WL 838284, at *5 (C.D. Cal. Mar. 25, 2009) ("(1) the class representative must not have interests antagonistic to the unnamed class members, and (2) the representative must be able to prosecute the action vigorously through qualified counsel'" (quoting Lerwill v. Inflight Motion Pictures, Inc., 582 F.2d 507, 512 (9th Cir. 1978))).
Nothing in the papers presently before the court suggests the representative plaintiff has any conflicts of interest with the other class members. See Mot. at 21. Because plaintiff's claims appear to be "completely aligned with [that] of the class, " there is no conflict. Collins, 274 F.R.D. at 301.
With regard to the second factor, "[a]lthough there are no fixed standards by which vigor' can be assayed, considerations include competency of counsel and, in the context of a settlement-only class, an assessment of the rationale for not pursuing further litigation." Hanlon, 150 F.3d at 1021. In addition, a named plaintiff will be deemed to be adequate "as long as the plaintiff has some basic knowledge of the lawsuit and is capable of making intelligent ...