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Dearaujo v. Regis Corp.

United States District Court, E.D. California

July 21, 2017

JESSICA DEARAUJO, individually and on behalf of others similarly situated, Plaintiffs,
v.
REGIS CORPORATION, a Minnesota corporation; SUPERCUTS CORPORATE SHOPS, INC., a Minnesota corporation; and DOES 1 through 99, inclusive, Defendants.

          ORDER

         This matter is before the court on named plaintiffs' unopposed motion for final approval of class action settlement, an incentive award and an award of attorneys' fees and costs. Mot., ECF No. 42-1; Mot. Attorneys' Fees, ECF No. 43. The court held a hearing on November 18, 2016, at which Sean Vahdat and James Hawkins appeared for plaintiffs and Catherine Dacre appeared for defendants. ECF No. 47. As explained below, the court GRANTS the motion.

         I. BACKGROUND

         A. Factual and Procedural Background

         Defendant Supercuts Corporate Shops, Inc. (Supercuts) is a wholly owned subsidiary of defendant Regis Corporation (Regis) (collectively, defendants). Preliminary Approval Order 2 (Prelim. Order) 2, ECF No. 37. Supercuts is authorized to do business in California in cosmetology and hair care. Id.[1]

         Plaintiff Amymarie Kaelan worked for defendants as a stylist beginning in 2008, was promoted to District Leader from on or about December 2010 through September 2012, and then served as the Regional Human Resources Manager from September 2012 until about 2014. Id. She asserts five claims: (1) failure to indemnify necessary expenditures; (2) failure to provide accurate wage statements; (3) failure to timely pay wages, (4) violations of the California Unfair Competition Law (UCL), Cal. Bus. & Prof. Code §§ 17200 et seq.; and (5) penalties under the Private Attorneys General Act of 2004 (PAGA), Cal. Labor Code §§ 2698 et seq. Prelim. Order at 2.

         Plaintiff Jessica Dearaujo worked for defendants as a stylist beginning on July 23, 2008, and was promoted to Salon Manager on or about March 1, 2009. Id. at 2-3. She is currently employed with defendants as a Salon Manager in Modesto, California. Id. She asserts six claims: (1) failure to provide meal periods; (2) failure to authorize and permit rest periods; (3) failure to provide accurate wage statements; (4) failure to reimburse necessary expenditures; (5) violations of the UCL; and (6) penalties under PAGA.[2] Id. at 3.

         To support their claims, plaintiffs alleged defendants required them to use their car for bank runs and errands, and to use their personal cell phones for defendants' benefit without reimbursement. Hawkins Settlement Decl. ¶ 26, ECF No. 42-3; First Amended Compl. (FAC) ¶¶ 65-66, ECF No. 22. Plaintiffs also alleged they were often required to work “off the clock” during a scheduled meal or rest period. FAC ¶ 23(a).

         Plaintiffs filed their original class action complaints in Stanislaus County Superior Court against Regis on May 8, 2014, and Regis removed the actions to this court on June 11, 2014, ECF No. 1. On April 15, 2015, by joint stipulation, plaintiffs filed the operative first amended complaints, which added Supercuts as a defendant. See FAC. On May 11, 2015, defendants filed answers to the first amended complaints. See ECF No. 23. On December 2, 2015, the court granted the parties' request to consolidate the two actions. ECF No. 28.

         In the meantime, the court had set a hearing on a motion for class certification, ECF Nos. 11, 25, 28, but the parties first reached preliminary settlement after a full day of private mediation on June 15, 2015, Hawkins Attorneys' Fees Decl. ¶ 16, ECF No. 43-1. Before the mediation, the parties engaged in formal discovery, which included the production of documents and responses to interrogatories and document requests, and the taking of depositions of plaintiffs Kaelan and Dearaujo. Id. ¶ 12. The parties also engaged in informal discovery, exchanging documents, including a sample of defendants' time records and pay records. Id. No other pretrial litigation has occurred.

         B. Preliminary Class Settlement Approval

         Plaintiffs filed a motion for preliminary approval of class settlement on May 5, 2016, ECF No. 31, and defendants filed a statement of non-opposition to the motion on June 3, 2016, ECF No. 33. The court preliminary approved the settlement on June 19, 2016 and conditionally certified the following classes:

[A]ll persons employed by defendants as an Area Supervisor, District Leader, or Senior District Leader in California at any time from May 8, 2010 through the date of preliminary approval of the settlement (“Settlement Class Period”), and who do not opt out of the Class Action Settlement Agreement (“Settlement” or “Settlement Agreement”).

[A]ll hourly non-exempt persons employed by defendants as a Shift Manager or Salon Manager in California at any time during the same Settlement Class Period, and who do not opt out of the Settlement.

Prelim. Order at 3-4.

         The court's preliminary approval identified five concerns that the court noted would need to be addressed prior to final approval. First, the court noted while the parties reached settlement after participating in a full-day of mediation with an experienced third party neutral, the parties presented little information to evaluate “the strength of plaintiffs' case, ” “the risk, expense, complexity, and likely duration” of this litigation as compared to any class action; “the risk of maintaining class action status throughout the trial, ” and “the amount offered in settlement.” Id. at 17-18 (quoting Hanlon v. Chrysler Corp., 150 F.3d 1011, 1026 (9th Cir. 1998)). To assess the merits of the case, the parties would need to submit information exchanged during the mediation for the court's in camera review. Id. (citing Bowling v. Pfizer, Inc., 143 F.R.D. 138, 140 (S.D. Ohio 1992) (ordering “an in camera disclosure” of confidential information concerning “all past settlements made by the Defendants involving the [device in question]”); Manual for Complex Litigation (MCL) § 21.631 (“A common practice is to receive information . . . in camera.”).

         Second, the court noted while the parties reached settlement only after participating in significant formal and informal discovery, final approval would be granted only after the court reviewed a “more detailed description of the parties' discovery efforts in this case and why those efforts contributed to a fair, reasonable, and adequate settlement.” Id. at 19.

         Third, the court was concerned with the “clear sailing” provision of the agreement because defendants and their attorneys agreed not to oppose class counsel's application for attorneys' fees or costs. Id. at 20. Before final approval, the court noted it would closely scrutinize fees requested. Id.

         Fourth, named plaintiffs' requests for incentive awards raised a potential concern because such awards “are not to be given routinely.” Id. (citing Morales v. Stevco, Inc., No. 00704, 2011 WL 5511767, at *12 (E.D. Cal. Nov. 10, 2011)). Before granting final approval, the court noted it would assess whether the requested incentive awards are excessive. Id.

         Fifth, the parties' chosen mechanism for distributing settlement funds to class members, which calls for allotting the settlement funds proportionally based on the total number of weeks worked, appeared reasonable. Id. at 21. The court nonetheless cautioned counsel final approval would be granted only after the court received a more detailed explanation of the mechanism's reasonableness and fairness. Id.

         These concerns are addressed below.

         C. Key Terms of Settlement Agreement

         Under the parties' settlement agreement, defendants agree to pay a gross settlement amount (“GSA”) of $1, 950, 000. Settlement Terms at 11. The GSA is inclusive of all individual class settlement payments, enhancement awards, settlement class counsel's fees and costs, PAGA penalty payments, and all administration costs. Id. The settlement amount does not include defendants' share of applicable payroll taxes for wage payments made to Settlement Class Members under the settlement; defendants bear that cost separately. Id. Upon approval, the GSA of $1, 950, 000 will be distributed as follows:

1. The total enhancement amount paid to named plaintiffs will be $30, 000, with $15, 000 for each named plaintiff;
2. The class administrator will receive $17, 000;
3. The PAGA payment is $10, 000, $7, 500 of which will go to the California Labor Workforce Development Agency as its seventy-five percent share of PAGA penalties, with $2, 500 distributed to the class on a pro rata basis;
4. Class counsel will receive $650, 000.00, or 33 percent of the GSA; and
5. The amount paid to class counsel for litigation expenses will be $18, 036.70.

Id. at 11-12; Hawkins Attorneys' Fees Decl. ¶18. After deducting these distributions from the GSA, the settlement amount available to putative class members will be $1, 227, 463.30 ($1, 950, 000.00 - $722, 536.70). Salinas Decl. ¶ 11, ECF No. 43-9.

         D. Notice to and Response from Class Members

         The putative class consists of 1, 230 members. Salinas Decl. ¶ 7. On August 16, 2016, the class administrator sent notice packets to all members listed. Id. If a member's notice was returned as undeliverable and without a forwarding address, the administrator performed an advanced address search, known as a “skip trace, ” on Accurint, a reputable Lexis-Nexis research tool. Id. ¶ 8. Through the advanced searches, the administrator located ninety-two updated addresses, to which it sent notice packets. Id. Ultimately, eleven members' notices were undeliverable because the class administrator was unable to locate a current address. Id. The class administrator received one opt-out from the settlement, but no objections to the settlement. Salinas Decl. ¶¶ 9-10.

         II. CLASS CERTIFICATION

         A party seeking to certify a class must demonstrate the class meets the requirements of Federal Rule of Civil Procedure 23(a) and at least one of the requirements of Rule 23(b). Amchem Prods., Inc. v. Windsor, 521 U.S. 591, 614 (1997). The court must undertake the Rule 23 inquiry independently. West v. Circle K Stores, No. 04-0438, 2006 WL 1652598, at *2 (E.D. Cal. June 12, 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” inquiry). Collins v. Cargill Meat Solutions Corp., 274 F.R.D. 294, 300 (E.D. Cal. 2011); Fed.R.Civ.P. 23(a).

         Where, as here, named plaintiffs seek certification under Rule 23(b)(3), the court must find also 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 effectively adjudicating the controversy.'” Wal-Mart Stores, Inc. v. Dukes (“Dukes”), 564 U.S. 338, 362 (2011) (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; (C) the desirability or undesirability of concentrating the litigation of the claims in the particular forum; and (D) the likely difficulties in managing the class action. Fed.R.Civ.P. 23(b)(3)(A)-(D); see also Zinser v. Accufix Research Inst., Inc., 253 F.3d 1180, 1190 (9th Cir. 2001).

         Here, the named plaintiffs seek final certification of the same class identified preliminarily, made up of two subgroups:

[T]he “Kaelan Settlement Class[, ]” [which] shall refer to all persons employed by any of the Defendants as an Area Supervisor, District Leader, or Senior District Leader in California at any time during the settlement class period.
[T]he “Dearaujo Settlement Class[, ]” [which] shall refer to all hourly non-exempt persons employed by any of the Defendants as a Shift Manager or Salon Manager in California at any time during the Settlement Class Period.

Mot. at 10. The class consists of the following:

Settlement Class Members shall refer to the Kaelan Settlement Class and the Dearaujo Settlement Class. Settlement Class Period shall include the period from May 8, 2010 through the date of Preliminary Approval of the Settlement . . . June [30], 2016.

Id. For purposes of final approval, the court determines whether the class ultimately satisfies Rules 23(a) and 23(b)(3).

         A. Numerosity

         In its order granting preliminary approval, the court found the numerosity requirement met because the parties agreed the putative class had 1, 752 potential plaintiffs. Prelim. Order at 12. For final approval, the parties now agree the class has 1, 230 members. Salinas Decl. ¶ 7. At hearing, the parties explained a payroll error caused the change in numbers; the error has been corrected now prior to this request for final approval.

         Although there is no absolute numerical threshold for numerosity, courts have approved classes as small as, for example, 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 (1982)). While the class size has decreased to 1, 230 members, it still far surpasses the number of members approved in past cases. The class remains large enough to satisfy the numerosity requirement.

         B. Commonality

         In preliminarily approving the class, the court found the commonality requirement met because there were common class ...


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