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Arellano v. Kellermeyer Building Services, LLC

United States District Court, S.D. California

December 5, 2014

AGUSTIN A. ARELLANO AND ANDRES LARA, individuals on behalf of themselves and all others similarly situated, Plaintiffs,
v.
KELLERMEYER BUILDING SERVICES, LLC, Defendant

For Agustin A. Arellano, an individual on behalf of himself, and all others similarly situated, Andres Lara, Plaintiffs: James M Treglio, LEAD ATTORNEY, Clark and Treglio, San Diego, CA; Robert Craig Clark, LEAD ATTORNEY, Clark Law Firm, San Diego, CA.

For Kellermeyer Building Service, LLC, an Ohio Corporation, doing business in California, Defendant: David R Ongaro, LEAD ATTORNEY, Thompson & Knight LLP, San Francisco, CA; Kyann Christina Kalin, LEAD ATTORNEY, Ongaro Burtt & Louderback LLP, San Francisco, CA.

For Ms. Venancia Portillo, Intervenor: Justian Jusuf, LEAD ATTORNEY, Law Office of Justian Jusuf APC, Huntington Beach, CA.

ORDER GRANTING PRELIMINARY APPROVAL OF CLASS ACTION SETTLEMENT (ECF No. 54)

Hon. Cynthia Bashant, United States District Judge.

On March 7, 2013, Plaintiff Agustin Arellano commenced this putative wage and hour class action against Defendant Kellermeyer Building Service, LLC (" Defendant") alleging violations of California state labor laws and unlawful business practices. On June 12, 2013, Plaintiff Agustin Arellano filed a First Amended Complaint against Defendant. On July 24, 2013, Plaintiffs Agustin Arellano and Andres Lara filed a Second Amended Complaint against Defendant, which is the operative complaint. (ECF No. 9 (" SAC").) On January 28, 2014, Venancia Portillo moved to intervene in this case as a plaintiff. Venancia Portillo's motion to intervene was granted on September 15, 2014.

Now pending before the Court is a motion for preliminary approval of class action settlement filed by Agustin Arellano, Andres Lara, and Venancia Portillo (collectively " Plaintiffs"). (ECF No. 54.) After " years of contentious litigation, extensive discovery, and arm's length negotiations, " Plaintiffs and Defendant (collectively the " Parties") have reached a settlement which, upon final Court approval, Plaintiffs contend will resolve the claims of Plaintiffs and all putative class members. Plaintiffs seek an order granting preliminary approval of the proposed class action settlement upon the terms and conditions set forth in the Joint Stipulation of Class Action Settlement and Release Agreement (" Settlement") submitted with Plaintiffs' motion. (ECF No. 54-2 at Ex. 1.) Defendant has not filed an opposition.

The Court finds this motion suitable for determination on the papers submitted and without oral argument. See Civ. L.R. 7.1(d)(1). For the following reasons, the Court GRANTS Plaintiffs' motion.

I. PROPOSED SETTLEMENT

The Settlement, dated November 1, 2014, is intended to fully resolve all disputes in the following actions: Portillo v. Kellermeyer Building Services, LLC, Alameda County Superior Court, Case No. RG11 558695, filed on August 10, 2010, as amended on September 19, 2011 (" Portillo "); Kellermeyer Building Services, LLC v. Portillo, Los Angeles County Superior Court, Case No. BC488397, filed on July 18, 2012 (" KBS v. Portillo "); and Arellano v. Kellermeyer Building Services, LLC, United States District Court for the Southern District of California, Case No. 13-cv-0533-BAS-BGS, filed on March 7, 2013, as amended on July 24, 2013 (" Arellano "). (Settlement at p. 3 and § 4(10).)

The Settlement applies to class members defined as " [a]ll persons employed by Kellermeyer Bergensons Services, LLC (formerly known as Kellermeyer Building Services, LLC) as janitors/housekeepers in the State of California at any time from August 10, 2006 to October 27, 2014" (" Settlement Class" or " Class Members"). (Id. at § § I, II(5).) The Settlement Class includes members of the Portillo class, as well as the two individuals who opted out of the Portillo class. (Id. at § I, IV(3).) According to Defendant's records, there are approximately 13, 413 members in the Settlement Class. (Id. at § II(5).)

For purposes of the Settlement, the Parties agree that, subject to the Court's approval, counsel for Portillo and Arellano will be appointed Class Counsel, Plaintiffs will be class representatives, and CPT Group will be appointed as the Settlement Administrator. (Id. at § § I, II(4, 7-8).)

Under the Settlement, Defendant will pay up to a maximum amount of $2, 700, 000 (" Gross Settlement Value"). (Id. at § § I, II(13), IV(4).) Out of this amount, Defendant will pay at least $1, 000, 000. (Id. at § § I, II(14-15).) Members of the Settlement Class will only be paid if they submit a valid and timely claim form (" Participating Class Members"). (Id. at § § I, IV(9)) The Settlement Class will not include those who timely request to opt out. (Id. at § § IV(3), IV(16).) Opt-outs will not be held to release any claims for individual relief in any of the above-listed actions, nor may they participate in the Settlement. (Id.)

Subject to Court approval, Defendant has agreed to pay the following enhancement awards to the named Plaintiffs: $10, 000 to Ms. Portillo, $2, 500 to Mr. Arellano, and $5, 000 to Mr. Lara. (Id. at § § I, II(12), IV(5).) CPT Group, as the Settlement Administrator, has agreed to administer the Settlement for a flat fee (including costs) of $55, 000. (Id. at § § I, IV(6).) Further subject to Court approval, Defendant has agreed to pay Class Counsel's attorneys' fees in the amount of $675, 000, which represents 25% of the Gross Settlement Value, and costs in the amount of $152, 000. (Id. at § § I, IV(7).) All of these amounts are to be paid out of the Gross Settlement Value. (Id.)

The Settlement estimates that approximately $1, 800, 500 will be available for payments to the Settlement Class after deducting Class Counsel's fees and costs, enhancement fees to the named plaintiffs, and the settlement administrator's fee and expenses. (Id. at § § I, II(17).) However, this amount may be further lowered by payment of Defendant's portion of federal, state, and local payroll taxes attributable to settlement payments to Participating Class Members. (Id. at § II(17).) The resulting number is referred to as the " Net Settlement Value." (Id.)

The Net Settlement Value is proposed to be allocated to Class Members in two components: (1) a settlement payment for deductions related to non-slip work shoes, and (2) settlement payments for other claims. (Id. at § IV(8).) For the first component, each Class Member shall be allocated an amount equaling the higher of $25 or 30% of his or her total Shoes For Crew Payroll Deductions. (Id.) For the second component, the balance of the Net Settlement Value, after subtracting amounts allocated in the first component, will be allocated to all Class Members based on their work year(s) during the class period. (Id.) If claims submitted by Participating Class Members are less than the Minimum Class Payout (approximately $100, 500), the difference between the Minimum Class Payout amount and the submitted claims will be distributed to the Participating Class Members proportionally based on their respective claim amounts. (Id.) The payment made to each Participating Class Member shall be allocated one-third to wages, one-third to penalties, and one-third to interest. (Id.)

Defendant has information regarding each Class Member in its files and will provide any information that the Settlement Administrator reasonably needs to administer the Settlement. (Id. at § IV(15).) The Settlement Administrator will update and correct any addresses provided and mail a notice of class settlement and customized claim form, as approved by the Court, in English and in Spanish, by first class mail to each of the Class Members (" Settlement Packet"). (Id.) The Settlement Packet will include a business return envelope or a prepaid envelope. (Id.) Class Members have 45 days from the original mailing to file a timely claim. (Id.) In addition to having the right to opt-out of the Settlement, Class Members also have 45 days from the date of original mailing to file written objections. (Id. at § 16.) If more than 10% of Class Members opt out of the Settlement, at Defendant's discretion, the Settlement can be rendered null and void upon written notice. (Id.) If Class Members do not opt-out and do not file a claim, they will receive no money and are bound by the terms of the Settlement. (Id. at Ex. A at B(6).)

The Effective Date of the Settlement is the later of 30 calendar days after the judgment of the Court becomes final and no longer subject to appeal, or 30 calendar days after entry of judgment if there are no objections. (Id. at § IV(11).) Defendant must fund the settlement amounts required by the Settlement within 35 calendar days after the Effective Date. (Id. at § IV(18).) The parties in Portillo and KBS v. Portillo will stipulate to a stay of those actions during the settlement approval process and dismiss those actions with prejudice upon the occurrence of the Effective Date. (Id. at § § I, IV(12).) Upon final approval by the Court of the Settlement, the class representatives and Class Members and their successors in interest fully release and discharge Defendant from any and all claims arising during the class period and asserted in the Second Amended Complaint in Portillo and the Second Amended Complaint in Arellano . (Id. at § IV(10).)

II. ANALYSIS

The Ninth Circuit maintains a " strong judicial policy" that favors the settlement of class actions. Class Plaintiffs v. City of Seattle, 955 F.2d 1268, 1276 (9th Cir. 1992). However, Federal Rule of Civil Procedure 23(e) first " require[s] the district court to determine whether a proposed settlement is fundamentally fair, adequate, and reasonable." In re Mego Fin. Corp. Sec. Litig., 213 F.3d 454, 458 (9th Cir. 2000) (citing Hanlon v. Chrysler Corp., 150 F.3d 1011, 1026 (9th Cir. 1998)). Where the " 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 these situations, settlement approval " requires a higher standard of fairness and a more probing inquiry than may normally be required under Rule 23(e)." Dennis v. Kellogg Co., 697 F.3d 858, 864 (9th Cir. 2012) (internal quotation marks omitted and citation omitted).

A. Class Certification

Before granting preliminary approval of a class-action settlement, the Court must first determine whether the proposed class can be certified. Amchem Prods., Inc. v. Windsor, 521 U.S. 591, 620, 117 S.Ct. 2231, 138 L.Ed.2d 689 (1997) (indicating that a district court must apply " undiluted, even heightened, attention [to class certification] in the settlement context" in order to protect absentees).

The class action is " an exception to the usual rule that litigation is conducted by and on behalf of the individual named parties only." Wal-Mart Stores, Inc. v. Dukes, 131 S.Ct. 2541, 2550, 180 L.Ed.2d 374 (2011) (quoting Califano v. Yamasaki, 442 U.S. 682, 700-01, 99 S.Ct. 2545, 61 L.Ed.2d 176 (1979)). In order to justify departing from that rule, " a class representative must be part of the class and 'possess the same interest and suffer the same injury' as the class members." Id. (citing E. Tex. Motor Freight Sys., Inc. v. Rodriguez, 431 U.S. 395, 403, 97 S.Ct. 1891, 52 L.Ed.2d 453 (1977)). In this regard, Rule 23 contains two sets of class-certification requirements set forth in Rule 23(a) and (b). United Steel, Paper & Forestry, Rubber, Mfg. Energy, Allied Indus. & Serv. Workers Int'l Union, AFL-CIO, CLC v. ConocoPhillips Co., 593 F.3d 802, 806 (9th Cir. 2010). " A court may certify a class if a plaintiff demonstrates that all of the prerequisites of Rule 23(a) have been met, and that at least one of the requirements of Rule 23(b) have been met." Otsuka v. Polo Ralph Lauren Corp., 251 F.R.D. 439, 443 (N.D. Cal. 2008).

" Rule 23(a) provides four prerequisites that must be satisfied for class certification: (1) the class must be so numerous that joinder of all members is impracticable; (2) questions of law or fact exist that are 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." Otsuka, 251 F.R.D. at 443 (citing Fed.R.Civ.P. 23(a)). " A plaintiff must also establish that one or more of the grounds for maintaining the suit are met under Rule 23(b), including: (1) that there is a risk of substantial prejudice from separate actions; (2) that declaratory or injunctive relief benefitting the class as a whole would be appropriate; or (3) that common questions of law or fact predominate and the class action is superior to other available methods of adjudication." Id. (citing Fed.R.Civ.P. 23(b)). Plaintiffs seek class certification under Rule 23(b)(3).

1. Numerosity -- Rule 23(a)(1)

Rule 23(a)(1) requires that the class be " so numerous that joinder of all members is impracticable." Fed.R.Civ.P. 23(a)(1). " [C]ourts generally find that the numerosity factor is satisfied if the class comprises 40 or more members and will find that it has not been satisfied when the class comprises 21 or fewer." Celano v. Marriott Int'l, Inc., 242 F.R.D. 544, 549 (N.D. Cal. 2007).

According to Defendant's records, there are approximately 13, 413 members in the Settlement Class. (Settlement at § II(5); ECF No. 54-2 (" Jusuf Decl.") at ¶ 40.) Thus, joinder of all members is impracticable for the purpose of Rule 23(a)(1) and Rule 23(a)(1) is satisfied.

2. Commonality -- Rule 23(a)(2)

Under Rule 23(a)(2), the named plaintiff must demonstrate that there are " questions of law or fact common to the class." Fed.R.Civ.P. 23(a)(2). " Commonality requires the plaintiff to demonstrate that the class members 'have suffered the same injury[.]'" Dukes, 131 S.Ct. at 2551 (quoting Gen. Tel. Co. of Sw. v. Falcon, 457 U.S. 147, 157, 102 S.Ct. 2364, 72 L.Ed.2d 740 (1982)). However, " [a]ll questions of fact and law need not be common to satisfy this rule." Hanlon, 150 F.3d at 1019. " The existence of shared legal issues with ...


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