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Wilson v. Tesla, Inc.

United States District Court, N.D. California

July 8, 2019

BRIAN WILSON, et al., Plaintiffs,
TESLA, INC., et al., Defendants.



         Plaintiffs Brian Wilson, Carrie Hughes, and Katia Segal filed this wage and hour action against their employer, Tesla, Inc. and Tesla Motors, Inc. (collectively “Tesla”). Plaintiffs allege that Tesla misclassified them as exempt employees and failed to provide them overtime, rest and meal breaks, wage statements, and final wages. Plaintiffs' motion for final approval of their class action settlement agreement and motion for attorneys' fees, costs, and an incentive award is now pending before the Court.[1] (Dkt. No. 47 & 51.) After reviewing the briefs and relevant legal authority and with the benefit of oral argument on April 4, 2019 the Court GRANTS the motion for final approval and GRANTS in part the motion for attorneys' fees, costs, and an incentive award.


         Tesla is an automaker and technology and design company that focuses on energy innovation. (Second Amended Complaint (“SAC”) at ¶ 7.) Telsa does not sell its vehicles at dealerships, but instead uses a “factory-direct sales system with non-negotiable pricing, ” although it does have showrooms where a few cars are available for test drives and purchase. (Id.) Plaintiffs Brian Wilson, Carrie Hughes, and Katia Segal are or were employed by Tesla as Owner Advisors showing and selling cars in Tesla's showrooms. (Dkt. No. 47-3 at ¶ 3.) Until January 2018, Tesla classified its Owner Advisors as exempt under the commissioned salesperson exemption and compensated them by paying a salary as well as bonuses and commissions. (Id.) Plaintiffs contend that they were misclassified as exempt employees and thus denied proper meal and rest breaks as well as overtime pay. (Id.)


         A. General Terms

         The Settlement Agreement establishes a common fund of $1, 059, 851.40 inclusive of attorneys' fees, costs and expenses, incentive payments to the named Plaintiffs, payment to the Labor Workforce Development Agency (“LWDA”), employee-owed taxes, and administration costs including settlement administration fees.[2] (Dkt. No. 51-3; Dkt. No. 51-2 at ¶ 3-4.) Under the Settlement Agreement, the common fund shall be allocated in the following manner:

(1) attorney's fees up to one-third of the fund ($333, 333),
(2) actual litigation costs of up to $20, 000,
(3) an incentive award for the named Plaintiffs of $10, 000 each,
(4) claims administration expenses up to $15, 000, and
(5) a $50, 000 PAGA penalty, $37, 500 of which shall be paid to the California Labor & Workforce Development Agency, and the remaining $12, 500 shall be included in the net distribution to the class.

(Dkt. No. 51-3 at ¶ 55; Dkt. No. 51-4 at ¶ 16.) Following these disbursements, the remaining funds are distributed to the class members based on the number of workweeks worked. (Dkt. No. 51-3 at ¶ 55(a).) Class members will have 180 days to cash their settlement checks. Any residue from the uncashed checks shall be paid by the Settlement Administrator to California's State Controller's Office for Unclaimed Property in the name of the class member.[3] No settlement funds will revert to Tesla.

         B. Class Members

         The class is comprised of all employees of Tesla who worked in California from June 29, 2013 through January 28, 2018 as an owner advisor, sales advisor, or another similar exempt sales position. (Dkt. No. 51-3 at ¶ 5.) There are 282 class members. Because this is not a claims made settlement (that is, class members do not need to submit a claim form to participate), and no class members have opted out of the settlement, all 282 class members will receive a pro rata share of the settlement.

         C. Notice

         On November 2, 2018, ILYM Group, the Settlement Administrator, received the class data file from Tesla, which contained the name, social security number, last known mailing address, and total number of workweeks for each settlement class member. (Dkt. No. 51-4 at ¶ 5.) The list contained 282 individuals (the “Class List”). (Id.) The Class List was then processed against the National Change of Address (“NCOA”) database, maintained by the United States Postal Service (“USPS”), for purposes of updating and confirming the mailing addresses of the class members before mailing of the Notice Packet. (Id. at ¶ 6.)

         On January 11, 2019, the ILYM Group mailed the Notice Packet via U.S First Class Mail, to all 282 individuals contained in the Class List. (Id. at ¶ 7.) Of these, 16 were returned as undeliverable. The ILYM Group performed a computerized skip trace on the 16 returned Notice Packets that did not have a forwarding address, in an effort to obtain an updated address for purpose of re-mailing the Notice Packet. (Id. at ¶¶ 10-11.) As a result of this skip trace, 10 updated addresses were obtained and the Notice Packet was promptly re-mailed to those class members, via U.S First Class Mail. (Id.) For the remaining 6, no further address information was found. (Id. at ¶ 12.)

         The Notice Packet advised class members of the applicable deadlines and the date of the final approval hearing, as well as how members could obtain additional information about the settlement. (Dkt. No. 51-4, Ex. A.) Class members were provided an ILYM Group toll-free number as well as an email address to make inquiries about the settlement. (Id. at 12.) Class counsel also created a website regarding the settlement where it made available Plaintiffs' motion for attorneys' fees and costs as well as other pleadings from this action. (Id. at 16.)

         On February 11, 2019, the ILYM Group mailed a reminder postcard, via U.S. First Class Mail, to the class members. (Dkt. No. 51-4 at ¶ 8.) The postcard served as a reminder to the class members of the deadline date to submit a request for exclusion, along with how to contact the ILYM Group for more information on the Settlement.

         As of March 20, 2019, ILYM Group had not received any requests for exclusion or to opt-out. (Id. at ¶¶ 13-14.) The deadline to request exclusion or to opt-out from the Settlement was March 12, 2019. (Id.)

         D. Release

         The scope of the general class release is:

Any and all claims, actions, demands, causes of action, suits, debts, obligations, damages, rights or liabilities, of any nature and description whatsoever, know or unknown that have been, could have been, or might in the future be asserted by Plaintiffs, or the Class Members or their respective heirs, executors, administrators, beneficiaries, predecessors, successors, attorneys, assigns, agents and/or representatives arising out of any claims that were or could have been encompassed in this Action, and any facts which reasonably flow from the facts alleged in Plaintiffs' Complaints.

(Dkt. No. 51-3 at ¶ 35.) The named Plaintiffs have a broader release, releasing any claims under California Civil Code section 1542 as well as the above claims. (Id. at ¶ 36.)

         E. Payments

         Within seven days of the Settlement Agreement's effective date, Tesla shall wire the settlement administrator the entire common fund amount of $1, 059, 851.40. (Id. at ¶ 54.) After deducting the fees award, costs award, incentive award, payment to LWDA, and administration fees, the remaining amount (the “Net Settlement Amount”) will be disbursed to the class members. (Id. at ¶¶ 24; 55.a.i.). The settlement administrator shall disburse the individual settlement awards to the class members within 14 days by sending them a check to their last known addresses. (Id. at ¶ 55.a.) The size of each individual settlement award is based on pro rata shares calculated based on the number of weeks each class member worked compared to the number of weeks worked by all class members. (Id. at ¶ 11.)

         The individual settlement awards shall be allocated as follows: one-third as wages subject to all applicable tax withholdings, one-third as non-wage penalties not subject to payroll tax withholdings, and one-third as non-wage interest not subject to payroll tax withholdings. (Id. at ¶ 55.a.iii.)


         Plaintiff Brian Wilson filed this action in June 2017 asserting seven claims for relief: (1) failure to pay overtime wages in violation of the FLSA; (2) failure to pay minimum wage in violation of California Labor Code section 1194; (3) failure to pay overtime in violation of California Labor Code sections 519 & 1194; (4) failure to provide meal breaks in violation of California Labor Code section 226.7 and IWC Order No. 4-2001; (5) failure to provide rest breaks in violation of California Labor Code section 226.7 and IWC Order No. 4-2001; (6) failure to provide proper wage statements in violation of California Labor Code section 226(a); and (7) unlawful business practices in violation of California Business & Professions Code section 17200 et seq. (Dkt. No. 1.) Prior to Tesla's appearance, Plaintiff amended the complaint to add Plaintiff Hughes and add a claim for failure to pay final wages in violation of California Labor Code sections 201 and 202. (Dkt. No. 10.)

         The parties engaged in an early mediation in November 2017 and were able to resolve the dispute with the terms finalized in May 2018. (Dkt. No. 22-1 at ¶ 13.) On the same day Plaintiffs filed their motion for preliminary approval, they filed a second amended complaint adding Plaintiff Segal, adding a PAGA claim, and withdrawing the FLSA claim. (Dkt. No. 21.) The Court denied the motion for preliminary approval based on numerous issues with the notice and settlement. (Dkt. Nos. 24, 30.) Plaintiffs then filed a renewed motion for preliminary approval. (Dkt. No. 29.) The Court held a hearing on August 30, 2018 and raised additional concerns regarding notice and ordered Plaintiffs to file a new notice by September 13, 2018. (Dkt. No. 31.) Plaintiffs addressed the Court's concern and the Court granted the renewed motion for preliminary approval on September 26, 2018. (Dkt. No. 33.) When Plaintiffs failed to file their motion for attorneys' fees and costs by the deadline set out in the Court's Order and failed to otherwise comply with portions of the Court's Order, the Court ordered Plaintiff to file a status report. (Dkt. No. 36.) The Court then held a status conference at which the parties apprised the Court of numerous issues which had arisen. (Dkt. No. 42.) In light of these issues, the parties submitted a modified settlement agreement and notice for the Court's approval. (Dkt. No. 43.) The Court granted the stipulation to modify the Settlement Agreement and Notice and set the Final Approval Hearing for April 4, 2019. (Dkt. No. 44.) Plaintiffs filed their attorneys' fees motion on January 11, 2019. (Dkt. No. 29.) Additional issues arose requiring yet another status conference and the motion for final approval was finally filed on March 21, 2019. (Dkt. Nos. 50; 51.)


         Judicial policy strongly favors settlement of class actions. Class Plaintiffs v. City of Seattle, 955 F.2d 1268, 1276 (9th Cir. 1992). “To vindicate the settlement of such serious claims, however, judges have the responsibility of ensuring fairness to all members of the class presented for certification.” Staton v. Boeing Co., 327 F.3d 938, 952 (9th Cir. 2003). 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.” Id.

         The approval of a class action settlement takes place in two stages. In the first stage of the approval process, the Court preliminarily approves the settlement pending a fairness hearing, temporarily certifies a settlement class, and authorizes notice to the class. See Villegas v. J.P. Morgan Chase & Co., No. CV 09-00261 SBA (EMC), 2012 WL 5878390, at *5 (N.D. Cal. Nov. 21, 2012). “At the [final] fairness hearing, presently before the Court, after notice is given to putative class members, the Court entertains any of their objections to (1) the treatment of the litigation as a class action and/or (2) the terms of the settlement.” Ontiveros v. Zamora, 303 F.R.D. 356, 363 (E.D. Cal. Oct. 8, 2014) (citing Diaz v. Trust Territory of Pac. Islands, 876 F.2d 1401, 1408 (9th Cir. 1989)). Following the final fairness hearing, the Court must reach a final determination as to whether the parties should be allowed to settle the class action pursuant to their agreed upon terms. See id.; Telecommc'ns Coop. v. DIRECTV, Inc., 221 F.R.D. 523, 525 (C.D. Cal. 2004).


         I. Motion for Final Approval

         A. Final Class Certification of the Settlement Class

         Class actions must meet the following requirements for certification: 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. Fed.R.Civ.P. 23(a).

         In addition to meeting the requirements of Rule 23(a), a potential class must also meet one of the conditions outlined in Rule 23(b)-of relevance here, the condition that “the court finds that the 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.” Fed.R.Civ.P. 23(b)(3). In evaluating the proposed class, “pertinent” matters include:

(A) the class members' interests in individually controlling the prosecution or defense of separate actions;
(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 ...

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