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Reyes v. CVS Pharmacy Inc.

United States District Court, E.D. California

June 28, 2016

CVS PHARMACY, INC., et al., Defendants.



         On May 11, 2016, Plaintiff Francisco Nieves Reyes, on behalf of himself and others similarly situated (hereinafter collectively referred to as “Plaintiffs”), moved for final approval of a class action settlement. (ECF No. 42.) Defendants CVS Pharmacy, Inc. and Caremark Rx, LLC (hereinafter collectively referred to as “Defendants”) filed a statement of non-opposition. (ECF No. 45.)

         Plaintiffs’ motion was heard on June 10, 2016. Counsel Gregory Karasik appeared on behalf of Plaintiffs, and counsel Jennifer Zargarof appeared telephonically on behalf of Defendants. The matter is deemed submitted and stands ready for adjudication.

         For the reasons set forth below, the motion will be granted.

         I. BACKGROUND

         A. Procedural History

         This action was filed in Stanislaus County Superior Court on January 30, 2013. (ECF No. 1.) It initially was removed to federal court on March 21, 2013 on grounds of federal question jurisdiction, but remanded on February 12, 2014. (Case No. 13-cv-00420-AWI-GSA, ECF Nos. 1 & 19.) The case again was removed to federal court on June 19, 2014, this time on grounds of diversity jurisdiction under the Class Action Fairness Act (“CAFA”). (ECF No. 1.) Plaintiffs’ motion for remand (ECF No. 5) was denied on August 11, 2014 (ECF No. 22).

         Thereafter, the parties engaged in discovery, including interrogatories, document production, and the depositions of two of Defendants’ human resources personnel most knowledgeable about Defendants’ payroll practices. The parties also engaged in informal discovery in which Defendants provided Plaintiffs with payroll data for a sampling of employees. Through discovery, Plaintiffs learned that Defendants had a policy of requiring employees to forfeit holiday pay upon termination. The parties agreed to mediate with respect to these claims and, on July 30, 2015, during mediation before Barry Winograd, Esq., the parties reached agreement on material terms of a class action settlement.

         On October 30, 2015, Plaintiffs moved for preliminary approval of the settlement. (ECF No. 35.) Defendants filed a statement of non-opposition. (ECF No. 37.) The motion was granted. (ECF No. 40). Pursuant to the settlement agreement and the Court’s order granting preliminary approval, Plaintiffs filed a first amended complaint. (ECF No. 41.)

         B. First Amended Complaint

         Plaintiffs asserts claims for failure to pay vacation wages owed upon termination, failure to pay all wages owed upon termination, and failure to pay final wages timely upon termination, in violation of the California Labor Code; unfair competition under the California Business and Professions Code; and civil penalties under the California Labor Code’s Private Attorney General Act of 2004 (“PAGA”). These claims arise from Plaintiffs’ allegations that Defendants (1) calculate the amount of employees’ accrued vacation on a monthly basis and (2) do not pay accrued but unused holiday pay timely upon termination.

         Named Plaintiff Francisco Nieves Reyes alleges the following facts: He worked for Defendants in Patterson, California from April 2008 to August 20, 2012. During that time, he earned vacation benefits on a daily basis, at a rate of 6.67 hours per month. Because Defendants only recorded Mr. Reyes’s vacation hours as accrued or earned on a monthly basis, they did not pay Plaintiff for vacation hours earned during his final, partial-month pay period of August 4, 2012 to August 20, 2012. Additionally, Mr. Reyes earned one personal “floating” holiday per year. Mr. Reyes did not use his floating holiday during his last year of employment, and therefore was due eight hours of pay upon his termination. Despite being discharged on August 20, 2012, he was not paid for the floating holiday until September 4, 2012.

         Mr. Reyes seeks to represent similarly situated individuals through a class action. The class is defined as “[a]ll persons who worked for CVS at the La Habra or Patterson Distribution Centers in the state of California, who were subject to collective bargaining agreements (but not including the La Habra Warehouse Agreement), [1] whose employment with CVS ended at any time since January 30, 2009 (for the unpaid vacation wages and late final wages classes) or January 30, 2010 (for the unpaid final wages class), who accrued vacation benefits and/or did not use all accrued floating holiday benefits during their employment with CVS. (ECF No. 41 at 32.) The class is made up of: the unpaid vacation wages class (including all of Defendants’ California employees who earned vacation and whose employment ended within the four years preceding filing of the complaint); the unpaid final wages class (including all of Defendants’ California employees who earned vacation and whose employment ended within the three years preceding filing of the complaint); and the late final wages class (including all of Defendants’ California employees who did not use all floating holidays accrued, and whose employment ended within the three years preceding filing of the complaint).

         C. Settlement Agreement

         Under the terms of the settlement agreement, Defendants agree to pay the gross settlement amount of $400, 000 to resolve the claims of any participating class members. The Settlement Class consists of all persons whose employment at CVS’s La Habra, California or Patterson, California Distribution Centers ended any time between January 30, 2009 and October 31, 2015, and who were subject to a collective bargaining agreement, not including the La Habra, California Warehouse Agreements. There are 447 class members. Class members are not required to submit claim forms to receive benefits.

         The following deductions will be made from the gross settlement fund:

• $1, 000 to the Labor Workforce Development Agency in relation to Plaintiffs’ PAGA claim;
• Up to $5, 000 to named Plaintiff Mr. Reyes as an incentive award for his services and participation as class representative;
• Up to $100, 000 (25 percent of the gross settlement fund) to class counsel for attorney fees;
• Up to $10, 000.00 in legal costs and expenses; and
• $6, 500 in claims administration costs.

         After subtracting these deductions from the gross settlement fund, the net settlement fund is estimated to be approximately $277, 500. It will be divided equally among participating class members and also used to pay Defendants’ share of payroll taxes associated therewith. Ninety percent of the Settlement Award will be allocated to penalties and interest. Ten percent of the Settlement Award will be allocated to wages. Unclaimed settlement checks shall escheat to the State of California’s Bureau of Unclaimed Property. No settlement funds will revert to Defendants.

         D. Preliminary Settlement Administration

         Pursuant to the settlement agreement and the Court’s preliminary approval order, the settlement administrator mailed, on March 3, 2016, Court-approved Notices of Proposed Class Action Settlement and Final Approval Hearing to the 447 class members. Some notices were returned as undeliverable and 19 notices were re-sent. Ultimately, six notices remained undeliverable.

         Defendants also mailed notices of the proposed settlement to the following attorneys general on March 25, 2016: the United States, California, Georgia, Nevada, Missouri, and Texas. (ECF No. 49.) At least one member of the settlement class resides in each of these states, according to Defendants’ records of each class member’s last known address.

         The deadline to submit requests for exclusion or objections to the settlement was April 2, 2016. The settlement administrator reported that there were no requests for exclusion or objections to the settlement within the time period specified in the notice. As of June 27, 2016, no objections were received from any of the attorneys general.


         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). The settlement of a certified class action must be fair, reasonable, and adequate. Fed.R.Civ.P. 23(e)(2). But, 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) (citation and internal quotation marks omitted).


         In the Court’s order granting preliminary settlement approval, the Court provisionally certified the settlement class. (ECF No. 40.) None of the information submitted with the motion for final approval undermines the Court’s previous determination. The Court will briefly review the factors applicable to class certification and its determination that certification of the settlement class is appropriate.

         To certify a class, a plaintiff must demonstrate that all of the prerequisites of Rule 23(a), and at least one of the requirements of Rule 23(b) of the Federal Rules of Civil Procedure have been met. Wang v. Chinese Daily News, Inc., 737 F.3d 538, 542 (9th Cir. 2013). When determining whether to certify a class for settlement purposes, a court must pay “heightened” attention to the requirements of Rule 23. Amchem Prods., Inc. v. Windsor, 521 U.S. 591, 620 (1997); Narouz v. Charter Commc’ns., LLC, 591 F.3d 1261, 1266 (9th Cir. 2010). Indeed, “[s]uch attention is of vital importance, for a court asked to certify a settlement class will lack the opportunity, present when a case is litigated, to adjust the class, informed by the proceedings as they unfold.” Amchem Prods., Inc., 521 U.S. at 620.

         In order to depart from the usual rule that litigation is conducted by individually named parties, “a class representative must be part of the class and ‘possess the same interest and suffer the same injury’ as the class members.” Wal-Mart Stores, Inc. v. Dukes (Wal-Mart), 131 S.Ct. 2541, 2550 (2011) (citation omitted). Rule 23(a) provides that the named plaintiffs are appropriate representatives 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.” These requirements ensure that the class claims are limited to those fairly encompassed by the named plaintiff’s claims. Wal- Mart, 131 S.Ct. at 2550.

         Additionally, Plaintiffs seek certification of a class under Federal Rule of Civil Procedure 23(b)(3), which requires that 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 efficiently adjudicating the controversy.

         Finally, it is noted:

Rule 23 does not set forth a mere pleading standard. A party seeking class certification must affirmatively demonstrate his compliance with the Rule - that is, he must be prepared to prove that there are in fact sufficiently numerous parties, common questions of law or fact, etc. We recognized in [Gen. Tel. Co. of SW v. Falcon, 457 U.S. 147 (1982)] that “sometimes it may be necessary for the court to probe behind the pleadings before coming to rest on the certification question, ” and that certification is proper only if “the trial court is satisfied, after a rigorous analysis, that the prerequisites of Rule 23(a) have been satisfied.”

Wal-Mart, 131 S.Ct. at 2551 (citations omitted) (emphasis in original).

         A. Numerosity

         The numerosity requirement is satisfied where “the class is so numerous that joinder of all members is impracticable.” Fed.R.Civ.P. 23(a)(1). Factors relevant to this requirement include: (1) the number of individual class members; (2) the ease of identifying and contacting class members; (3) the geographical spread of class members; and (4) the ability and willingness of individual members to bring claims, as affected by their financial resources, the size of the claims, and their fear of retaliation in light of an ongoing relationship with the defendant. See, e.g., Twegbe v. Pharmaca Integrative Pharm., Inc., 2013 U.S. Dist. LEXIS 100067, 2013 WL 3802807 (N.D. Cal. July 17, 2013), and sources cited therein.

         Here, the settlement class is comprised of 447 members[2] and is therefore numerous and easily identified. Additionally, only six Notices to class members were ultimately undeliverable. (Id.) Accordingly, on the whole, the class is easy to locate and contact. The value of the individual claims makes individual actions unlikely and inefficient. Based on these factors, the Court concludes the numerosity requirement is satisfied.

         B. Commonality

         The commonality requirement is satisfied when a plaintiff shows that “there are questions of law or fact common to the class.” Fed.R.Civ.P. 23(a)(2). Plaintiffs’ claims must depend upon a common contention 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 the claims in one stroke.” Wal-Mart, 131 S.Ct. at 2551.

         Common questions abound in this action. Did Defendants record vacation time on a monthly basis? Did they, as a result, fail to pay class members all earned vacation time upon termination? Did Defendants fail to pay class members all wages owed upon termination? Answers to these common questions will substantially drive the litigation and resolve issues central to the validity of several of Plaintiffs’ claims. See Wal-Mart, 131 S.Ct. at 2551.

         There is, however, one area in which class members do not appear to be uniformly situated: the forfeiture of unused floating holiday pay. Plaintiff alleges that Defendants had a policy requiring forfeiture of unused floating holidays upon termination. However, this policy apparently was not applied uniformly to all class members. Plaintiff Reyes, for example, was paid his floating holiday pay, although belatedly. Thus, it appears the class may contain members who were not paid floating holiday pay at all, those who were paid late, and even those who used all of the floating holiday pay they earned and thus are owed nothing. Therefore, asking whether Defendants have a policy requiring forfeiture of holiday pay, standing alone, will not resolve Plaintiffs’ claims.

         Nevertheless, Rule 23(a)(2) is to be construed permissively. Hanlon v. Chrysler Corp., 150 F.3d 1011, 1019 (9th Cir. 1998). “All questions of fact and law need not be common to satisfy the rule. The existence of shared legal issues with divergent factual predicates is sufficient, as is a common core of salient facts coupled with disparate legal remedies within the class.” Id. Here, class members share common legal issue of unpaid vacation wages, unpaid final wages, and late final wages. Unpaid floating holidays are but one factual predicate upon which these claims rest. The Court concludes that the factual variations are insufficient to defeat commonality.

         Accordingly, the Court concludes the commonality requirement is satisfied.

         C. Typicality

         Typicality ensures that Plaintiff Reyes is the proper party to proceed with the suit. The test is “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.” Hanon v. Dataproducts Corp., 976 F.2d 497, 508 (9th Cir. 1992). “Under the rule's permissive standards, representative claims are ‘typical’ if they are reasonably co-extensive with those of absent class members; they need not be substantially identical.” Hanlon, 150 F.3d at 1020.

         With the exception of claims concerning forfeited floating holiday wages, the claims of Mr. Reyes are substantially identical to those of the other class members. The claims for late and/or forfeited floating holiday pay are reasonably co-extensive. These claims involve similar legal issues and only minor factual variations.

         Accordingly, the typicality requirement is satisfied.

         D. Adequacy ...

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