C\j W (y) CL 0 _j co J U) 0 0 0) < z U _j > j < U W 0 < Z C3 W 0 z M 0: 0 0 Z (L W 0 M LO 0) C\j f I 0 ORICINAL 0 CHRISTIAN J. PETRONELLI, SBN 284522 [email protected]J_ULIA M. DAMRON, SBN 301502 [email protected]PETRONELLI & HO LLP 295 Redondo Ave., Suite 201 Long Beach, California 90803 Telephone: (888) 855-3670 Facsimile: (888) 449-9675 ABRAHAM MATHEW, SBN 181110 [email protected]JACOB GEORGE, SBN 213612 [email protected]SANG J PARK, SBN 232956 [email protected]MATHEW & GEORGE 500 South Grand Avenue, Suite 1490 Los Angeles, California 90071 Telephone: (310) 478-4349 Fax: (310) 478-9580 (Additional Counsel Below) Su fOrnia P@Pio C 0 u n S S S hePri R. C OCT 8 0 2017 artet, E. - BY CC 16 e ()i - t-- --A ~A' '_ % " er1 clerk Alaria A g, 9 Deputy SUPERIOR COURT OF THE STATE OF CALIFORNIA FOR THE COUNTY OF LOS ANGELES Coordination Proceeding Special Title (Rule 3.550) COSTCO WAGE AND HOUR CASES. LOREN CASH and ARRIANE HENRYHAND, on behalf of themselves and all others similarly situated, Plaintiffs, vs. SMART -PROFESSIONALS, LLC, a Utah limited liability corporation; COSTCO WHOLESALE CORPORATION, a Washington corporation; and DOES I through 50, inclusive, Defendants. Case No.: JCCP487 I ?1al(p6065j~5 - Assigned for all purposes to: Hon. Elihu M. Berle Dept. 323 CLASS ACTION MEMORANDUM OF POINTS AND AUTHORITIES IN SUPPORT OF MOTION FOR PRELIMINARY APPROVAL OF CLASS ACTION SETTLEMENT Date: December 15, 2017 Time: 10:00 a.m. Dept.: 323 BY FAX MEMORANDUM OF POINTS AND AUTHORITIES IN SUPPORT OF MOTION FOR PRELIMINARY APPROVAL OF CLASS ACTION SETTLEMENT 419904OOv.]
Transcript
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ORICINAL 0
CHRISTIAN J. PETRONELLI, SBN [email protected]_ULIA M. DAMRON, SBN [email protected] & HO LLP295 Redondo Ave., Suite 201Long Beach, California 90803Telephone: (888) 855-3670Facsimile: (888) 449-9675
ABRAHAM MATHEW, SBN [email protected] GEORGE, SBN [email protected] J PARK, SBN [email protected] & GEORGE500 South Grand Avenue, Suite 1490Los Angeles, California 90071Telephone: (310) 478-4349Fax: (310) 478-9580
(Additional Counsel Below)
SufOrniaP@PioC 0 u n S S
ShePri R. C
OCT 8 0 2017artet, E.-
BY CC 16e ()i-t---A ~A' '_ % "er1clerkAlaria A g, 9 Deputy
SUPERIOR COURT OF THE STATE OF CALIFORNIA
FOR THE COUNTY OF LOS ANGELES
Coordination Proceeding
Special Title (Rule 3.550)
COSTCO WAGE AND HOUR CASES.
LOREN CASH and ARRIANEHENRYHAND, on behalf of themselves andall others similarly situated,
Plaintiffs,
vs.
SMART-PROFESSIONALS, LLC, a Utahlimited liability corporation; COSTCOWHOLESALE CORPORATION, aWashington corporation; and DOES Ithrough 50, inclusive,
Defendants.
Case No.: JCCP487 I ?1al(p6065j~5-
Assigned for all purposes to:Hon. Elihu M. BerleDept. 323
CLASS ACTION
MEMORANDUM OF POINTS ANDAUTHORITIES IN SUPPORT OF MOTIONFOR PRELIMINARY APPROVAL OFCLASS ACTION SETTLEMENT
Date: December 15, 2017Time: 10:00 a.m.Dept.: 323
BY FAX
MEMORANDUM OF POINTS AND AUTHORITIES IN SUPPORT OF MOTION FOR PRELIMINARY APPROVAL OF CLASS
ACTION SETTLEMENT
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SHAUN SETAREH, SBN [email protected] SEGAL, SBN [email protected] LAW GROUP9454 Wilshire Boulevard, Suite 907Beverly Hills, California 90212Telephone: (310) 888-7771Fax: (310) 888-0109
Attorneys for Plaintiffs
MEMORANDUM OF POINTS AND AUTHORITIES IN SUPPORT OF MOTION FOR PRELIMINARY APPROVAL OF CLASS
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TABLE OF CONTENTS
1. INTRODUCTION I
11. KEY TERMS OF CLASS SETTLEMENT 2
111. FACTS AND PROCEDURE 3
A. Plaintiffs filed a putative class action alleging Labor Code violations 3
B. Plaintiffs' Counsel thoroughly investigated the factual and legal issues 4
C. Plaintiffs' Counsel realistically assessed the settlement value of claims 5
1 . Overtime and doubletime claims 5
2. Meal period and rest break claims 6
3. Wage statement claim 7
4. Waiting-time and PAGA penalties 8
5. Failure to reimburse business expenses 9
D. Parties settled after a full day mediation 10
E. Proposed settlement fully resolves Plaintiffs' claims 10
I . Composition of the Settlement Class 10
2. - Settlement consideration 10
3. Release by the Settlement Class 12
IV. ARGUMENT 13
A. Court should preliminarily approve the Class Action Settlement 13
1 . Courts review class action settlements to ensure that the terms are fair,
adequate, and reasonable 13
2. Plaintiff Counsel's thorough investigation led to settlement 14
3. Settlement was reached through arm's-length bargaining by Parties
represented by experienced counsel 15
4. Settlement is reasonable given the strengths of Plaintiffs' claims and
the risks and expense of litigation 16
B. Class Notice properly informs the Class about the case and settlement 18
MEMORANDUM OF POINTS AND AUTHORITIES IN SUPPORT OF MOTION FOR PRELIMINARY APPROVAL OF CLASSACTION SETTLEMENT
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C. The proposed PAGA settlement is reasonable 20
D. The Class Representative Enhancement Payment is reasonable 21
E. The negotiated Attorney's Fees and Costs are reasonable 23
F. California law authorizes provisional certification for settlement purposes 23
1 . California standard for class certification 23
2. Proposed Settlement Class is ascertainable 24
3. The Class Members share a well-defined community of interest 24
V. CONCLUSION 27
MEMORANDUM OF POINTS AND AUTHORITIES IN SUPPORT OF MOTION FOR PRELIMINARY APPROVAL OF CLASSACTION SETTLEMENT
Plaintiffs alleged that Defendant Costco enforced a scheduling policy and practice that
made it difficult for Class Members to take uninterrupted duty free meal periods and rest breaks.
Plaintiffs calculated Defendants' maximum exposure for the meal periods and rest breaks by
taking the product of the total number of qualifying shifts worked by Class Members during the
Class Period (approximately 25,127) and estimated average hourly rate of pay ($16.00).
Defendants' maximum theoretical exposure had to be offset by the strength of its
defenses (e.g., no widespread meal period and rest break violations, and Defendants authorized
and permitted meal periods and rest breaks), and the likelihood of the following events: Class
certification; winning on liability; and prevailing on appeal.
Plaintiffs provided a deeper discount for the rest break claim because employers do not
have an obligation to record rest periods (rest periods are paid breaks). The relative lack of
written proof—except for anecdotal Class Member testimony—would have reduced the
likelihood of certifying the claim.
Plaintiffs especially recognized the risks of Class certification presented by the following
recent decisions: See, e.g., Ali v. U.S.A. Cab Ltd., 176 Cal. App. 4th 1333, 1341 (2009) (denying
certification because employees' declarations attesting to having taken meal periods and rest
' A key analytical point here is that Costco claims that only Defendant Smart Professionals had "retained" theClass Members to work, and Smart Professionals has gone defunct, leaving the other Defendants holding thealleged liability bag. Proving liability against these other Defendants would require proof of joint-employerstatus, which the Parties hotly dispute.
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breaks demonstrated that individualized inquiries were required to show harm); Campbell v.
Best Buy Stores, L.P., 2013 U.S. Dist. LEXIS 137792, at *30-41 (C.D. Cal. Sept. 20, 2013)
(following Brinker and denying certification of proposed meal period and rest break class due to
lack of uniform policy); Jimenez v. Allstate Ins. Co., 2012 U.S. Dist. LEXIS 65328 (C.D. Cal.
Apr. 18, 2012) (denying motion to certify meal period and rest break class based on employer's
practice of understaffing and overworking employees); Gonzalez v. Officemax N. Am., 2012
U.S. Dist. LEXIS 163 853 (C.D. Cal. Nov. 5, 2012) (same); Brown v. Fed Express Corp., 249
F.R.D. 580, 587-88 (C.D. Cal. 2008) (denying certification of driver meal period and rest break
claims based on the predominance of individual issues); Kenny v. Supercuts, Inc., 252
F.R.D.641, 645 (N.D. Cal. 2008) (denying certification on meal periods claim); Blackwell v.
Skywest Airlines, Inc., 245 F.R.D. 453, 467-68 (S.D. Cal. 2007) (declining to certify class action
because individual issues predominated when different employee stations provided different
practices with respect to meal periods).
Realistically, and considering the real risks of continued litigation, Plaintiffs valued the
meal period and rest break claims for settlement purposes between $35,177.80 and $70,355.60,
and $8,794-45 and $17,588.90, respectively. (Petronelli Decl. T~ 18-22)
3. Wage statement claim
Plaintiffs alleged that Defendant failed to properly itemize Class Members'wage
statements in violation of Labor Code § 226(a). Penalties for violations of section 226(a) are
assessed at the rate of $50 for the initial pay period in which a violation occurs and $100 per
employee for each violation in a subsequent pay period, not to exceed an aggregate of $4,000
dollars per employee. [Cal. Lab. Code § 226(e)]
Plaintiffs calculated Defendants' maximum exposure for the wage statement claim by
taking the product of the approximate total statutory pay periods worked by Class Members
(approximately 1,959) and the statutory penalty. Plaintiffs then offset Defendants' maximum
exposure by the strength of its affirmative defenses and the risks of continued litigation.
Defendants commonly argue that Class Members are not han-ned by non-compliant wage
statements, and courts should not penalize employers for purported unintentional errors on wage
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statements. Before Section 226(e) was amended, the dispositive issue was whether "suffering
injury" was satisfied by the deprivation of a legal right or by consequential damages caused by
the non-compliant wage statements. Employers had frequently prevailed in arguing for the latter
interpretation. Even after the enactment of section 226(e), some courts have held that this
amendment merely clarified existing law and held that Plaintiffs must demonstrate actual injury.
[See Loud v. Eden Med. Or., 2013 U.S. Dist. LEXIS 122873, **36-53 (N.D. Cal. Aug. 28,
2013) (granting summary judgment on wage statement claim because plaintiff could not show
injury due to defects and that incorrect wage information is not willful)] Even if wage statement
claims survive summary judgment, the strength of the claim is inextricably tied to the strength
of the underlying predicate claims (i.e., liability for any wage statement claim is completely
derivative).
Hence, and considering the risks of continued litigation, Plaintiffs valued the wage
statement claim for settlement purposes between $14,665.00 and $29,330.00. (Petronelli Decl.
~~ 23-26)
4. Waiting-time and PAGA penalties
Plaintiffs alleged waiting-time 3 and PAGA penaltieS4 for Defendants' purported
violations of underlying Labor code violations. Although the formulae for calculating maximum
penalties under Labor Code §§ 203 and 2699(0(2) are fairly straightforward, the analysis
becomes more difficult for settlement purposes because waiting time and PAGA claims are only
as strong as the underlying predicate claims.
I Under California law, if an employer discharges an employee, all wages earned and unpaid at the time ofdischarges are due and payable immediately to the employee. Failure to pay an employee all wages and premiumpay owed, including overtime premiums, reporting time pay, meal period/rest period premiums, and split shiftpremium pay, may entitle an employee to waiting time penalties. These penalties continue for up to 30 calendardays. Waiting time penalties are computed by multiplying the employee's daily wage rate by the specified numberof days since the payment of the wages became due, not to exceed 30 calendar days. See Lab. Code § 203.
' Under PAGA, the civil penalty for violations of any of the code provisions enumerated by Lab. Code § 2699.5 isone hundred dollars ($ 100) for each aggrieved employee per pay period for the initial violation and two hundreddollars ($200) for each aggrieved employee per pay period for each subsequent violation. See Lab. Code §2699(l)(2).
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First, Defendants could have argued that waiting-time penalties are applicable only when
the failure to pay wages at tennination is "willful." (See Lab. Code § 203; Cal. Code Regs., tit.
8, § 13520)5 Second PAGA penalties are discretionary, i.e., a judge may order a defendant to
pay all penalties, or none at all--even if the plaintiff proves liabi I ity.' Further, one of Plaintiffs'
stronger PAGA penalty was premised on Defendants' alleged failure to record meal periods in
violation of Labor Code § 1198 and IWC Wage Orders. However, Defendants could have
argued that recording of meal periods is not "conditions of labor" contemplated by Labor Code
§ 1198.
Hence, and considering the risks of continued litigation, Plaintiffs valued waiting time
and PAGA penalty claims at between $427,896.00 and $855,792.00, and $65,992.50 and
Plaintiffs alleged that Defendants failed to reimburse Class Members' out-of-pocket
business expenses under Labor Code § 2802, as Defendants allegedly required Class Members
to use their cell phones for work at their own personal expense. Plaintiffs calculated Defendants'
maximum exposure for the wage statement claim by taking the product of the estimated
business expenses incurred by each Class Member (approximately $100) and the number of
Class Members. Plaintiffs then offset Defendants' maximum exposure by the strength of its
affirmative defenses and the risks of continued litigation.
Hence, and considering the risks of continued litigation, Plaintiffs valued the failure to
reimburse business expenses claim at between $4,952.50 and $9,905.00. (Petronelli Decl. % 30-
31)
5 Defendant would also have argued a good faith dispute as to whether wages are due precludes the imposition ofwaiting time penalties. Cal. Code Regs., tit. 8, § 13520.
' "For purposes of this part, whenever the Labor and Workforce Development Agency, or any of its departments,divisions, commissions, boards, agencies, or employees, has discretion to assess a civil penalty, a court isauthorized to exercise the same discretion, subject to the same limitations and conditions, to assess a civil penalty."Lab. Code § 2699(e)(1). Courts have not hesitated in exercising this discretionary authority. See, e.g., Fleming v.Covidien, Inc., No. ED CV] 0-01487,2011 U.S. Dist. LEXIS 154590, at *8-9 (C.D. Cal. Aug. 12, 2011) (slashingPAGA penalties for wage statement violations by over 500%, from $2.8 million to $500,000).
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D. Parties settled after a full day mediation
The Parties agreed to private mediation to attempt to resolve the Class claims. On July
25, 2017 the Parties attended an all-day mediation with Mark Rudy—a well-regarded mediator
with extensive experience in resolving wage and hour class actions. The Parties agreed to the
principal terms for a settlement under Mark Rudy's guidance, and that compromise is
memorialized in the Settlement Agreement. After another two months of negotiating, the parties
finalized a long-form Settlement Agreement. At all times the Parties' negotiations were
adversarial and non-collusive. (Petronelli Decl. ~ 32)
E. Proposed settlement fully resolves Plaintiffs' claims
1. Composition of the Settlement Class
The proposed Settlement Class Members consist of all persons whom Defendant Smart
Professional retained to work as a roadshow representative at any Costco warehouse in
California at any time from January 19, 2012 through preliminary approval, estimated to include
566 Class Members. [Settlement Agreement §§ 1.7, 1.10, 3.2.] The proposed Settlement
Collective Members consist of all persons whom Defendant Smart Professionals retained to
work as a roadshow representative at any Costco warehouse in the United States at any time
from January 19, 2013 through preliminary approval, estimated to include 2,252 Class
Members. [Id.] There are 32 persons who were retained to work as roadshow representatives at
Costco warehouse locations both within and outside of California. [Id.]
2. Settlement consideration
Plaintiffs and Defendant have agreed to fully resolve the Class claims for $1,500,000.
The Class Settlement Amount includes: (1) settlement payments to participating Class Members
("Net Settlement Proceeds"); (2) attorneys' fees of $495,000.00 and litigation costs actually
incurred; (3) Claims Administration Fee of estimated to be not more than $30,000; (4) LWDA
Payment of $56,250; and (5) Class Representative Enhancement Payments of $12,500 and
$12,500 to Plaintiffs Loren Cash and Arriane Henryhand, respectively. (Settlement Agreement
§§ 3-4, 7.3-7.6.)
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Seventy-five percent (75%) of the net Class Settlement Amount will be allocated to the
settlement of California released claims and twenty-five percent (25%) will be allocated to the
settlement of FLSA released claims. The distribution of the Net Settlement Proceeds to Class
Members is straightforward: Each Class Member's share of the settlement will be proportional
to the total number of daily work shifts worked during the Class Period. (Settlement Agreement
§§ 7.6.3-7.6.4) Defendant Smart Professionals' records will determine Class Members' number
of work shifts, and Class Members will have an opportunity to challenge those records.
(Settlement Agreement § 7.6. 1; see Notice of Settlement [Class Notice], p. 9.)
The Individual Settlement Payments will be apportioned for tax purposes as 35% wages,
60% penalties and interest, and 5% (unreported) for nontaxable amounts representing
reimbursement of employee business expenses. (Settlement Agreement § 7.8.) For the 35% of
Class Members' settlement proceeds considered "wages," the Settlement Administrator will
make required tax withholdings from each individual settlement payment and remit the
withholdings and Defendants' share of payroll taxes to the appropriate tax authorities.
(Settlement Agreement § 7.8.)
If any Class Members opt out, the Settlement Administrator will proportionately
increase the individual Settlement payment for each Participating Class Member to ensure that
100% of the Net Settlement Proceeds is distributed to participating Class Members. (Settlement
Agreement § 7.6.7.)
If any Class Member fails to cash his or her Settlement check after 180 days, the check
will become void and the funds intended for that Class Member will be tendered to the
California Industrial Relations Department, Unclaimed Wages Fund, in the name of the Class
Member. (Settlement Agreement § 7.8.3.) If any Collective Member fails to cash his or her
Settlement check after 180 days, the Settlement Administrator will direct 20% of the associated
funds to Class Members on a pro rata basis and 80% of the associated funds to participating
Collective Members on a pro rate basis. (Settlement Agreement § 7.6.6.)
No portion of the Class Settlement Amount will revert to Defendants.
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3. Release by the Settlement Class
Plaintiffs and Class and Collective Members agreed to the Released Claims in exchange
for the Class Settlement. (Settlement Agreement § 8)
For Class Members, the Released Claims include the following claims: any claim of
liability or cause of action that was or could have been asserted in this Action or that is based on
or arises out of the facts alleged in this Action, including, without limitation, claims or causes of
action for:
0 unpaid overtime
missed meal or rest breaks
meal or rest break penalties
unreimbursed employee business expensesliquidated damages
unlawful deductions from wages
conversion of wages
record -keep i ng violations
wage statement penalties
&Cwaiting time" penalties0 any claim or cause of action under Wage Order and Labor Code section 98.6,
201-204, 218, 218.5, 221-223, 226, 226.3, 226.7, 226.8, 510, 512, 558, 1102.5,1174, 1174.5, 1194, 1194.2, 1197, 1198, 2800, 2802Cal ifornia Business and Professions Code sections 17200, et seq.,California Labor Code sections 2698, et seq.
(Settlement Agreement § 8. 1)
For Collective Members, the Released Claims include all claims under the Fair Labor
Standards Act that Collective members will release if they opt in to the collective by accepting
payment under the Settlement Agreement. (Settlement Agreement § § 1. 19, 7.6.5-7.6.6.)
The Released Parties include "Defendant [Costco Wholesale Corporation] and each and all of its
current or former subsidiaries, parents, affiliates, predecessors, insurers, agents, employees,
successors, assigns, officers, officials, directors, attorneys, personal representatives, executors,
and shareholders, including their respective pension, profit sharing, savings, health, and other
employee benefits plans of any nature, the successors of such plans, and those plans' respective
current or former trustees and administrators, agents, employees, and fiduciaries. "Released
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Parties" also includes Costco's Special Event vendors, Smart Professionals, LLC, Morgan &
Sampson, Inc., and as to each of the foregoing, all of their present and foriner subsidiaries,
affiliates, and joint ventures, and all of their shareholders, officers, directors, employees, agents,
servants, registered representatives, attorneys, insurers, successors and assigns, and any other
persons acting by through. under or in concert with any of them." (Settlement Agreement §
1.35.)
Plaintiffs also agreed to an additional general release of their individual claims in
exchange for their Enhancement Awards. (Settlement Agreement § 8.2)
IV. ARGUMENT
A. Court should preliminarily approve the Class Action Settlement
1. Courts review class action settlements to ensure that the terms are
fair, adequate, and reasonable
California Rule of Court ("Rule"), Rule 3.769 requires litigants to obtain court approval
of class action settlements. Approval occurs in two steps: (1) an early "preliminary" review by
the trialcourt; and (2) a subsequent "final" review after notice of the settlement has been
distributed to class members for their comments and objections. Cal. Rules of Court, Rule
3.769(c)-(g); Cellphone Termination Fee Cases, 180 Cal. App. 4th I 110, H 18 (2009) (the court
first "preliminarily approves the settlement" and later "conducts a final approval hearing to
inquire into the fairness of the proposed settlement").
Preliminary approval is warranted if the settlement falls within a "reasonable range." See
North County Contractor's Assn., Inc. v. Touchstone Ins. Services, 27 Cal. App. 4th 1085, 1089-
90 (1994); Conte & Newberg, Newberg on Class Actions, § 11.26 (4th ed. 2002) ("Newberg").
Reasonableness and fairness are presumed where: (1) the settlement is reached through "arms-
length bargaining," (2) investigation and discovery are "sufficient to allow counsel and the court
to act intelligently," (3) counsel is "experienced in similar litigation," and (4) the percentage of
objectors "is small." Dunk v. Ford Motor Co., 48 Cal. App. 4th 1794, 1802 (1996). The
presumption of fairness is consistent with California's public policy goal of favoring
settlements. Stambaugh v. Super. Ct., 62 Cal. App. 3d 231, 236 (1976) ("the law wisely favors
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As detailed above, the Settlement is fair and reasonable given the strengths of Plaintiffs'
claims and the various impediments to recovery. Plaintiffs determined the settlement value of
their claims—that is, a value that takes into account the probability of losing at appeal, on
certification, or on the merits—at between $897,906.63 to $1,795,813.25. The actual settlement
value of $1,500,000 thus falls squarely within "the ballpark of reasonableness" and is thus fair,
adequate and reasonable. (Petronelli Decl. 136)
It should be noted that the reasonableness of a settlement is not dependent upon the
potential recovery plaintiffs might have received if they had succeeded at trial. [See Wershba v.
Apple Computer, Inc., 89 Cal. App. 4th 324,346 (2001) ("The proposed settlement is not to be
judged against a hypothetical or speculative measure of what might have been achieved had
plaintiffs prevailed at trial."); Sutter Health Unins. Pricing Cases, 171 Cal. App. 4th 495, 511
(2009) (emphasizing that the court must be mindful that "[flhe ... class case could have gone to
an incredibly lengthy and expensive jury trial, -and the class could have lost the case" and must
account for that likelihood in discounting the value of the claims for settlement purposes
[emphasis in original])f (Petronelli Decl. T 37)
' Federal district courts recognize that there is an inherent "range of reasonableness" in determining whether toapprove a settlement "which recognizes the uncertainties of law and fact in any particular case and the concomitantrisks and costs necessarily inherent in taking any litigation to completion." Frank v. Eastman Kodak Co., 228F.R.D. 174, 188 (W.D.N.Y. 2005) (quoting Neivinan v. Stein, 464 F. 2d 689, 693 (2d Cir. 1972)). Therefore, "fflhedetermination whether a settlement is reasonable does not involve the use of a 'mathematical equation yielding aparticularized sum."' Id. at 186, quoting In re Michael Milken andAssoc. Sec. Litig., 150 F.R.D. 57, 66 (S.D.N.Y.1993). See In re Omnivision Tech., Inc., 559 F. Supp. 2d 1036 (N.D. Cal. 2008); see also Na17 Rural Telecomm.Coop. v. Direciv, Inc., 221 F.R.D. 523, 527 (C.D. Cal. 2004) ("well settled law that a proposed settlement may beacceptable even though it amounts to only a fraction of the potential recovery"); In re Global Crossing Sec. andERISA Lifig., 225 F.R.D. 436, 460 (S.D.N.Y. 2004) ("settlement amount's ratio to the maximum potential recovery
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Further, and generally speaking on the risks of continued litigation, a number of cases
with the same claims as here were not suitable for class adjudication because they raised too
many individualized issues. [See Brown v. Fed Express Corp., 249 F.R.D. 580, 587-88 (C.D.
Cal. 2008) (denying certification of driver meal and rest period claims based on the
predominance of individual issues); Kenny v. Supercuts, Inc., 252 F.R.D. 641, 645 (N.D. Cal.
2008) (denying certification on meal periods claim); Blackwell v. Skywest Airlines, Inc., 245
F.R.D. 453, 467-68 (S.D. Cal. 2007) (declining to certify class action because individual issues
predominated when different employee stations provided different practices with respect to meal
2012) (trial court denied certification of rest break claims where the plaintiffs offered no
common method of distinguishing between instances when employees were not permitted to
take breaks); and Lanzarone v. Guardsmark Holdings, Inc., 2006 U.S. Dist. LEXIS 95785 * I I -
13 (C.D. Cal. 2006) (denying motion for class certification when common questions did not
predominate because varied meal and rest periods policies varied from shift to shift)] (Petronelli
Decl. ~ 38)
Some courts have denied certification even when an employer's policies are unlawful on
their face. For instance, in Ordonez v. Radio Shack, Inc., 2013 U.S. Dist. LEXIS 7868 (C.D.
Cal. Jan. 17, 2013), the court rejected plaintiff s evidence of a facially unlawful policy and
denied certification. The Ordonez court credited anecdotal evidence of compliance
notwithstanding the unlawful policy. The Ordonez and other similar cases demonstrate that
certification of wage and hour claims are inherently risky. Thus the risk of continued litigation
militated in favor of settlement. (Petronelli Decl. T 39)
Here Defendants have posited that the instant claims are not amenable to Class
Certification, and heavily disputes that Plaintiffs and Class would ultimately succeed on the
need not be the sole, or even dominant, consideration when assessing settlement's fairness"); In re NON OfficeSolutions, Inc. Sec. Litig., 194 F.R.D. 166, 184 (E.D. Pa. 2000) ("the fact that a proposed settlement constitutes arelatively small percentage of the most optimistic estimate does not, in itself, weigh against the settlement; ratherthe percentage should be considered in light of strength of the claims"); Officersfor Justice v. Civil Serv. Comm.,688 F. 2d 615, 628 (C.A. Cal. 1982) (it is "tile complete package, taken as a whole rather than the individualcomponent parts, that must be examined for overall fairness").
Page 17MEMORANDUM OF POINTS AND AUTHORITIES IN SUPPORT OF MOTION FOR PRELIMINARY APPROVAL OF CLASS
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merits. Consequently Plaintiffs face numerous risks in continued litigation, including: (1) the
risk of losing certification and, even if the Class is certified, losing on liability; (2) the risk of
obtaining a lesser amount than the Settlement after years of litigation and a lengthy and costly
class-action trial; and/or (3) the risk a class certification order orjudgement will be held in
abeyance by the appellate process. Hence Plaintiff Counsel's analysis and investigation in
valuing the case included the real possibility that Class Members would not recover anything
after years of litigation. (Petronelli Decl. ~ 40)
The Settlement here guarantees that Defendant Costco will pay $1,500,000 to Class
Members for their alleged damages. Therefore this Settlement easily falls.within the range of
reasonableness because it provides a significant and timely recovery to Class and Collective
Members. (Petronelli Decl. ~ 41)
Further the risks of continued litigation is particular high since "California employment
law would likely make obtaining class certification particularly difficult [flollowing the
Supreme court's decision in Wal-marl Stores, Inc. v. Dukes, 131 S. Ct. 2541 (2011)." Laguna v.
Coverall N. Am., No. 12-55479,2014 U.S. App. LEXIS 10259, * I I (9th Cir. 2014) (affirming
an order approving a class action settlement that discounts heavily for legal risk). The risk has
been exacerbated by the enhanced proof requirements for class actions set forth in the recent
Duran v. US. Bank National Assn., 59 Cal. 4th 1 (2014) decision—providing Plaintiffs yet
another obstacle.
In short—and given the substantial risks in continued litigation, including the
uncertainty of success—the Settlement represents a reasonable compromise of Plaintiffs' claims
and ensures that Class Members will receive a fair and adequate recovery.
B. Class Notice properly informs the Class about the case and settlement
Class members are entitled to the best practical notice under the circumstances. Kass v.
Young, 67 Cal. App. 3d 100, 106 (1977). The purpose of the notice is to give class members
sufficient information to decide whether they should accept the benefits offered, opt out and
pursue their own remedies, or object to the settlement. Trotsky v. Los Angeles Fed Savings &
Loan Assn., 48 Cal. App. 3d 143, 151-52 (1975). The notice must advise class members "that
Page 18MEMORANDUM OF POINTS AND AUTHORITIES IN SUPPORT OF MOTION FOR PRELIMINARY APPROVAL OF CLASS
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they may be excluded from the class if they so request and that they will be bound by the
judgment, whether favorable or not, if they do not request exclusion." Kass, 67 Cal. App. 3d at
106. California authorities generally require service of the class notice by mail or similar
reliable means. Chance v. Super. Ct., 58 Cal. 2d 275, 290 (1962); Cant v. Super. Ct., 50 Cal.
App. 3d 960, 972 (1975). Due process does not require that each class member actually receive
a notice, but rather that a procedure reasonably certain to reach class members is used. Wright,
A. Miller & M Kane, Federal Practice and Procedure § 1789, at 253 (2d ed. 1986).
The Parties have jointly drafted the Notice of Settlement that fairly and neutrally inform
Class Members of their rights and remedies in this action. The Notice of Settlement will be
mailed to all Class Members by First Class mail and will include, among others, the following
information: the nature of the lawsuit; Settlement terms; class definition; deadlines to opt out or
object; the final approval hearing date; the formula used to calculate settlement payments
(including the individual Class Member's dates ofernployment and number of workweeks
during the Class Period); instructions for disputing the dates of employment or number of
workweeks; and the terms and scope of the Released Claims. (Petronelli Decl. % 42-43; Exhibit
2)
The Notice Packet will be sent to the Class Members using Defendants' records of the
Class Members' full name; last known address and last known home telephone number; Social
Security number (where available); 8 dates of employment in California during the Class Period;
and any other relevant information needed to calculate settlement payments. In the event Notice
Packets are returned as undeliverable, the Settlement Administrator will attempt to locate a
current address using, among other resources, a skip-trace. (Settlement Agreement § 5.4.) This
method will maximize Class Member response rates while ensuring cost effective Settlement
8 Smart Professionals' business records are incomplete and do not contain Social Security numbers for all classmembers. The Settlement Administrator will collect Social Security numbers from Class Members in aconfidential manner and, for each Class Member with a missing Social Security number, will transmit proceedsto the California Industrial Relations Department, Unclaimed Wages Fund, in the name of the Class Member.(Petronelli Decl. ~ 45)
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administration. Similar notice methods to class members in the past have resulted in strong
response rates. (Petronelli Deci. ~ 44)
Class Members will have 45 calendar days after the Notice Packet is mailed to opt-out
from this Settlement. In order to opt-out Class members must sign and postmark a written
request for exclusion which must: (1) be signed and dated by the Class Member; (2) provide the
Class member's full name and former names if applicable, address, telephone number and the
last four digits of his or.her Social Security number; (3) include an express statement that the
Class Member wishes to be excluded from the terms of the Settlement Agreement, (4) be
returned by mail to the Settlement Administrator at the specified address; and (5) be postmarked
on or before the deadline. (Settlement Agreement §§ 6.2, 6. 1.)
Class Members wishing to object to the settlement must send a written objection to the
Settlement Administrator, not later than 45 calendar days after the Notice Packet is first mailed.
Only Class Members who have not opted-out may object to the Settlement. Class Members
submitting objections must state the basis of their objections and include any papers and briefs
in support o f their position. All objections must be signed and must state the Class Member's
current address and telephone number (or that of his or her counsel). Any Class Member may
also appear at the Final Fairness and Approval Hearing, if permitted by the Court. (Settlement
Agreement § 6.3.1; see Notice Packet.)
Accordingly, both the method of disseminating and the content of Notice Packet satisfy
due process requirements of California law. (Petronelli Decl. ~ 46) See Cal. Rules of Court, Rule
3.776(e)-(f); State of Cal. v. Levi Strauss, 41 Cal. 3d 460, 485 (1986) (the class notice must
"fairly apprise the class members of the terms of the proposed compromise and of the options
open to dissenting class members.").
IC. The proposed PAGA settlement is reasonable
Labor Code § 2699(l) requires the Court to "review and approve any penalties sought as
part of a proposed settlement agreement pursuant to [PAGA]." "The purpose of court review of
the penalties in subdivision (1) is to ensure that settlements involving penalties arising under
Labor Code Section 2699 do not undercut the dual statutory purposes of punishment and
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deterrence, or result in unjust, arbitrary, and oppressive, or confiscatory settlements." 7,129/04
Letter from Sen. Dunn to Sen. Burton re SB 1809.
Seventy-five thousand dollars ($75,000) from the Net Settlement Proceeds are allocated
to the resolution of Plaintiffs' PAGA claims-75% of which, or $56,250, will be paid directly to
the LWDA. [Settlement Agreement §§ 1.29, 7.5.] The agreement was reached after good-faith
negotiation between the Parties. Where PAGA penalties are negotiated in good faith and "there
is no indication that [the] amount was the result of self-interest at the expense of other Class
Members," such amounts are generally considered reasonable. (Hopson v. Hanesbrands Inc.,
Case No. 08-00844, 2009 U.S. Dist. LEXIS 33900, at *24 (N.D. Cal. Apr. 3, 2009); see, e.g.,
Nordstrom Com. Cases, 186 Cal. App. 4th 576, 579 (2010) ("[T]rial court did not abuse its
discretion in approving a settlement which does not allocate any damages to the PAGA
claims.")).
As for the legislative intent of PAGA, the allocation for PAGA penalties is sufficient to
satisfy the dual purpose of deterrence and punishment, given that Defendant will also be
required to pay such a large amount in unpaid wages through the class settlement, which would
also be recoverable under PAGA through Labor Code § 558. A larger allocation could rise to
the level of an "unjust, arbitrary, and oppressive, or confiscatory" amount, given that it would
provide double punishment in light of the class settlement payments already being awarded to
Class Members. Moreover, this allocation takes into account the fact that the Court has
discretion to reduce the PAGA award if Plaintiff prevailed on this claim at trial. See, e.g.,
Fleming v. Covidien, Inc., No. ED CV10-01487,2011 U.S. Dist. LEXIS 154590, at *8-9 (C.D.
Cal. Aug. 12, 2011) (slashing PAGA penalties for wage statement violations by over 500%,
from $2.8 million to $500,000).
D. The Class Representative Enhancement Payment is reasonable
Plaintiffs seek Enhancement Awards for accepting the responsibilities of representing
the interests of all Class Members and assuming risks and potential costs that were not borne by
any other Class Members. Named Plaintiffs are eligible for payments that reasonably
compensate them for undertaking and fulfilling a fiduciary duty to represent absent class
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members. Cellphone Termination Fee Cases 11, 186 Cal. App. 4th at 1393; Bell v. Farmers Ins.
Exchange, 115 Cal. App. 4th 715, 726 (2004) (upholding "service payments" to named
Plaintiffs for their efforts in bringing the case). "Incentive awards are fairly typical in class
action cases. Such awards are intended to compensate class representatives for work done on
behalf of the class. . . ." Rodriguez v. West Publ'g Corp., 563 F.3d 948, 958 (9th Cir. 2009)
(citing William B. Rubenstein et al., Newberg on Class Actions § 11:38 (4th ed. 2008). These
payments work both as an inducement to participate in the suit and as compensation for time
spent in litigation activities. See In re Mego Fin. Corp. Sec. Litig., 213 F.3d 454, 463 (9th Cir.
2000) (describe the service award as an incentive to the class representatives).
Here, the Parties have negotiated $12,500 for Plaintiff Loren Cash's Enhancement
Award and $12,500 for Plaintiff Arriane Henryhand's Enhancement Award in recognition of
their following efforts: originating the action; providing relevant documents to Class Counsel;
serving as a private attorney general under PAGA; appearing for their depositions and being
deposed at length concerning the merits of the Class Claims; regularly conferring with Class
Counsel on case status and strategies for prosecuting the claims; traveling to and attending an
all-day mediations with Mark Rudy in San Francisco; and reviewing the Settlement to ensure its
fairness and adequacy for the Class. Further, other Class Members would not have recovered at
all, but for Plaintiffs' actions. (Petronefli Decl. ~ 47)
Courts have also recognized that individuals face a particular set of challenges when
bringing class action suits. Both current and former employees place their future employment
prospects in peril by becoming class representatives, as "the fact that a plaintiff has filed a
federal lawsuit is searchable on the internet and may become known to prospective employers
when evaluating the person." (Guippone v. BH S&B Holdings LLC, No. 09 Civ. 1029, 2011
U.S. Dist. LEXIS 126026, at *4 (S.D.N.Y. Oct. 28,2011))
Plaintiffs have assumed considerable reputational risk that may impact their
employability in the near and distant future. Long after this action is forgotten by Class
Members, Plaintiffs will have to endure the risk of being branded "litigious" by prospective
employers, and may have employment applications rejected on that basis. (Petronefli Decl. T 48)
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Last, Plaintiffs released their personal damages as part of the Cal. Civ. Code § 1542
general release that is considerably broader than the separate narrower release of the Settlement
Class. (Settlement Agreement § 8.2.) Plaintiffs' execution of a general release—entailing an
additional detriment for Plaintiffs that does not apply to other Class Members—further supports
their request for an enhancement award. (Petronelli Decl. 149) See Schaffer v. Litton Loan
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