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oN “9/5/2019
Adam M. Rose, Esq. (210880) By. Isl Jennifer Tannous
adam@frontierlawcenter,com
Theodore R. Tang, Esq. (313294)
theodore@frontierlawcenter.com
Emanuel Starr, Esq. (319778)
manny (@frontierlawcenter.com
FRONTIER LAW CENTER
23901 Calabasas Road, STE 2074
Calabasas, CA 91302
Telephone: (818) 914-3433
Facsimile: (818) 914-3433
Attorneys for Plaintiff
James Rushing
SUPERIOR COURT OF CALIFORNIA
10 COUNTY OF SAN MATEO
i
12 JAMES RUSHING, individually and on behalf Case No. 18-CTV-01808
of all others similarly situated,
13 CLASS ACTION
Plaintiffs, PLAINTIFF JAMES RUSHING’S NOTICE
14
OF MOTION AND MOTION FOR
Vv.
15 PRELIMINARY APPROVAL OF
SECOND AMENDED CLASS ACTION
SECURITY INTELLIGENCE SPECIALIST AND PAGA SETTLEMENT;
16 CORPORATION and DOES 1 to 100, MEMORANDUM OF POINTS AND
AUTHORITIES; DECLARATION OF
17 Defendants. THEODORE TANG; [PROPOSED]
ORDER GRANTING PRELIMINARY
18 APPROVAL
19 Date: September 12, 2019
Time: 11 a.m.
20 Dept: 2E
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MOTION FOR PRELIMINARY APPROVAL OF CLASS ACTION SETTLEMENT
TO ALL PARTIES AND THEIR ATTORNEYS OF RECORD:
PLEASE TAKE NOTICE that on September 12, 2019 at 11:00 a.m. or as soon thereafter as may
be heard in Department 2E of the Superior Court of California, County of San Mateo, located at
400 County Center, Redwood City, CA 94063, Plaintiff James Rushing will and hereby does
move this Court for an Order:
(1) Granting Preliminary Approval of Class Action and Representative Action Settlement
of the above titled case;
(2) Certifying the class as defined in the Second Amended Stipulation Re: Settlement as
a class action for purposes of settlement only pursuant to California Code of Civil
10 Procedure section 382;
il (3) Approving the proposed form notice to class members;
12 (4) Scheduling a hearing on final approval of the settlement at which class members may
13 be heard and;
14 (5) Scheduling a hearing on Plaintiff's counsel’s application for an award of fees and
15 litigation costs.
16 This motion is based on this notice, the memorandum of points and authorities, the
17 stipulation of settlement and release, the proposed notice to class members, the declarations and
18 exhibits attached hereto, the pleadings filed in the present case, and any other such evidence or
19 argument as may be presented at the hearing.
20
21 Date: September 5, 2019 FRONTIER LAW CENTER
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24 Attorney for Plaintiff
James Rushing
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MOTION FOR PRELIMINARY APPROVAL OF CLASS ACTION SETTLEMENT
TABLE OF CONTENTS
INTRODUCTION
IL. FACTUAL BACKGROUND
A Unlawful Labor Policies
B The Labor Litigation
Cc The Settlement Agreement
D. Proposed Distribution of Settlement Funds
Tl ARGUMENT
10 A The Class Should be Certified for Settlement Purposes. ........0.cccseeees 6
ll L The Class is Ascertainable and Numerous
12 2. The Class Shares Common Interests and Common Questions
of Law and Fact.
13
3 Plaintiffs Claims are Typical of Class Members’ Claims
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4 Plaintiff will Adequately Represent the Settlement Class
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The Proposed Settlement is Fair and Reasonable
16
1 The Settlement Agreement Resulted From Thorough
17 Discovery and Arms-Length Negotiation By Experienced
Counsel
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2. The Proposed Settlement Amount and Timing are Fair
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20 of the Settlement and the lass Mi
The Proposed Notice Fairly Ap) rises the Class Members of the Terms
lember Rights under the Settlement.. 10
21 The PAGA Settlement Should Be Approved 11
22 l Labor Code Section 2699 Notice"¢ Requirements HHave Been
Satisfied... 11
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2. The PAGA Settlement Is Fair 11
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IV CONCLUSION 12
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MOTION FOR PRELIMINARY APPROVAL OF CLASS ACTION SETTLEMENT
TABLE OF AUTHORITIES
Cases
Brown y. Superior Court (2013) 216 Cal.App.4th 1302 12
Bufil v. Dollar Financial Group, Inc. (2008) 162 Cal. App.4th 1193
Dunk v. Ford Motor Co. (1996) 46 Cal.App.4th 1794 6,8
In re: Glansaol Holdings Inc., Case No. 18-14102-(MEW).... 10
Mallick v. Superior Court (1979) 89 Cal.App.3d 434
Nordstrom Commission Cases (2010) 186 Cal.App.4th 576 12
O’Connor v. Uber Technologies, Inc. (N.D. Cal 2016) 201 F.Sup3d 1110 11
10
Richmond v Dart Indus, Inc. (1981) 29 Cal.3d 462
11
Rose v. City of Hayward (1981) 126 Cal. App.3d 926......0008
12
Rowe v. Laura Geller Beauty, LLC, Case No. BC702685 10
13
Stambaugh v Superior Court (1976) 62 Cal.App.3d 231
14
Vasquez v. Superior Court (1971) 4 Cal.3d 800...
15
Statutes
16
11 USC §507(a)(8) sessessecsee
17
Code of Civil Procedure Section 382...
18
Labor Code section 2699(1)(2) .. 11
19
Labor Code section 2699.3 .o.cccccecscecescsescseereessestssesteassieessescsnestatsestesssneeseesseensecsnsaene 11
20
to Labor Code section 2699 subdivision (1) ............ 11
21
Treatises
22
Cohelan, Cal. Class Actions (2017-2018 ed. 2017 ........
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25
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MOTION FOR PRELIMINARY APPROVAL OF CLASS ACTION SETTLEMENT
MEMORANDUM OF POINTS AND AUTHORITIES
I INTRODUCTION
This class action alleges violations under Labor Code sections 226, 512, 226.7, and 203
as well as Business and Professions Code section 17200 et seq (the “Unfair Competition Law”)
and penalties under Labor Code section 2699 et seq (“PAGA”) on behalf of current and former
security guards employed by SIS between April 11, 2014 and the date of preliminary approval
of the settlement. The settlement obligates SIS to pay a total of $480,000 over four years, with
$270,000 comprising the net settlement fund payable directly to the class, $17,500 as PAGA
penalties, and $10,000 to be paid to Plaintiff Rushing as an incentive award. $12,500 is
10 budgeted to pay for claims administration. In addition, the settlement provides for payment of
11 $10,000 for litigation costs and $160,000 in attorneys’ fees.
12 This settlement differs in several significant ways from the initial settlement the Parties
13 sought approval on in March 2019. First, the class period now runs through March 1, 2019,
14 instead of the date of preliminary approval, so the size of the class can be determined now.
15 Second, additional discovery and analysis of the class data revealed that there were a significant
16 number of duplicate names in the data, such that the actual class size is 866, not over 1,400 as
17 originally believed. Third, the funds have been redistributed, reducing the amount assigned to
18 PAGA and claims administration and redirecting those funds into the Net Settlement amount for
19 the class. Fourth, the monthly payments have been adjusted such that the settlement will be
20 funded in 4 years instead of 5. Fifth, Legal Aid At Work, a San Francisco based non-profit that
21 provides legal assistance to employees facing the same kind of violation alleged in the present
22 case, has replaced Bet Tzedek as the cy pres organization to which unclaimed funds will revert.
23 This settlement is advantageous to the plaintiff class members and merits preliminary
24 approval. Defendant SIS is currently still in significant financial distress and at risk of falling
25 into bankruptcy. To further complicate matters, SIS’s biggest individual creditor (other than the
26 class) is the IRS, which holds a tax lien that would be entitled to priority in the event of a
27 bankruptcy. The priority IRS debt owed by SIS is sufficiently large that it creates a substantial
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MOTION FOR PRELIMINARY APPROVAL OF CLASS ACTION SETTLEMENT
tisk that most class members would recover nothing whatsoever in the event of a bankruptcy.
This settlement and payment structure will allow SIS to avoid bankruptcy and allow the plaintiff
class to avoid this substantial risk and recover some compensation for the alleged violations.
iL. FACTUAL BACKGROUND
A Unlawful Labor Policies
The litigation stems from SIS policies contrary to California employment law. SIS had a
break policy that did not provide for 10-minute duty free rest breaks and 30-minute duty free
meal periods as required by the Labor Code or 1WC Wage Order 4, or to provide premium pay
in lieu of such breaks, or to pay employees for time spent working during these 30-minute
10 periods. SIS also provided piecemeal wage statements that failed to comply with the
i requirements of Labor Code 226. Finally, SIS violated the Healthy Workers Healthy Families
12 Act, codified at Labor Code section 245 et seq, (the “HWHFA”) by denying employees the use
13 of paid sick time. Defendant denies these allegations and maintains that it followed and
14 continues to follow all California and Federal laws.
15 B. The Labor Litigation
16 On February 14, 2018, Plaintiff's counsel sent a written request to SIS via certified mail
17 requesting Plaintiffs employment records pursuant to Labor Code sections 226 and 1198.5, in
18 order to investigate Plaintiffs claims of unlawful labor practices there. Having received no
19 response, on March 16, 2018, Plaintiff, through counsel, sent notice to the LWDA and to SIS of
20 the intent to bring a PAGA claim on behalf of himself and all aggrieved employees for the
21 violations alleged in the present lawsuit. Having again received no response, Plaintiffs counsel
22 filed the initial complaint on April 11, 2018.
23 SIS answered the complaint on May 9, 2018, Shortly thereafter, the parties entered into
24 a stipulation to allow Plaintiff to file a First Amended Complaint that incorporated PAGA
25 allegations, which Plaintiff filed on June 5, 2018. Plaintiffs conducted discovery, which
26
1 While 11 U.S.C. § 507(4)(A) allows priority for wage claims over the IRS, it only does so for
27 wages (not civil penalties) earned in the 180 ys proceeding bankruptcy. As of the date of the
hearing on this motion, 145 of those 180 days will have already expired.
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MOTION FOR PRELIMINARY APPROVAL OF CLASS ACTION SETTLEMENT
included a review of almost 41,000 pages of records reflecting, schedules, hours worked, and
payments made to class members within the class period. The parties agreed that the case was
suitable for mediation and agreed to mediate the case before Jeffrey A. Ross. Plaintiff also
conducted a deposition of the person most qualified for SIS with regard to the issues alleged in
the complaint.
During the PMQ deposition, counsel for SIS indicated that SIS had engaged a forensic
accountant to review SIS’s finances and expressed a serious doubt about SIS’s ability to fund a
substantial class award. For the remainder of the litigation, the focus on investigation and
discovery shifted from liability and damages to SIS’s financial situation. SIS provided to
10 Plaintiffs counsel through informal discovery (and under a stipulated protected order), a series
ll of financial documents, including:
12 ()) SIS’s tax filings for the last several years;
13 Q) Recent letters from the IRS confirming the status of a significant tax debt;
14 GB) Balance sheets and Profit & Loss statements;
15 (4) A report prepared by a forensic accountant detailing SIS’s ability to pay money
16 damages;
17 6) The principal owners’ personal tax filings for the last several years; and
18 (6) Documents related to property owned by the principal owner.
19 During this discovery process, the parties continued to negotiate aspects of the case. The
20 negotiations were contentious and complex. At one point, the mediation was canceled due to
21 concerns about SIS’s ability to pay awy amount. However, after conducting a telephonic
22 mediation with Mr. Ross, and several rounds of negotiations after, the parties finally reached a
23 Settlement Agreement. (Tang Declaration, 10.) Plaintiff filed a motion for preliminary
24 approval on March 4, 2019
25 On March 15, 2019 the court denied preliminary approval of that settlement. Among
26 issues raised by the court were the low amount of the Net Settlement Fund in relation to the
27 expected size of the class, the length of time before the settlement would be funded, and the cy
28 pres organizations lack of connection to the interest of the putative class members.
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MOTION FOR PRELIMINARY APPROVAL OF CLASS ACTION SETTLEMENT
The parties met and conferred in an attempt to resolve the issues, including follow up
discovery. Specifically, Defendants provided to Plaintiffs counsel spreadsheet data identifying
the class members, their hire and termination dates (if applicable), and the number of paychecks
issued. In compiling this data, Defendants discovered that their original estimate of the class
size accidentally double-counted a large number of individuals, resulting in an overestimated
class size. In addition, about 15% of the class worked only a single pay period, and over half
were issued 12 paychecks or less. Thus, the distribution of funds to full-time workers in the
class is much more highly concentrated than originally believed.
Cc. The Settlement Agreement
10 The Settlement Agreement provides for certification of a single class, defined as “All
11 individuals who worked in California for SIS [Defendant] as security guards during the period
12 of April 11, 2014 through March 1, 2019” (Settlement Agreement { 3.) The total amount of the
13 settlement is $480,000, to be paid in installments of not less than $8,000 per month until fully
14 funded ($8,000 per month in the first year, $10,000 per month in the second, $12,500 a month in
15 the third, and $9,500 per month in the fourth and final year). (Settlement Agreement, ff 8-9.)
16 SIS will pay the class $270,000 in cash distributed directly to the class members by the
17 claims administrator (the “Net Settlement Fund”). (Settlement Agreement {10 c.) This reflects a
18 $23,000 increase over the previous settlement agreement, achieved by obtaining a lower bid on
19 settlement administration and reducing the amount allocated to PAGA penalties. This is a non-
20 reversionary amount, and any unclaimed checks will revert to the cy pres organization Legal Aid
21 At Work which, among other services, provides workers direct representation helps workers
22 know their rights, provides guidance to workers in how to represent themselves before the Labor
23 Commissioner, and provide other legal services to workers facing wage theft and other
24 violations similar to the violations the class is alleged to have suffered in this case. They are a
25 local organization and perform these services here in the bay area. (Settlement Agreement 410
26 h.) In addition to the $270,000 Net Settlement Fund, SIS will pay $17,500 in PAGA penalties,
27 distributed 75% ($13,125) to the LWDA and 25% ($4,375) to the aggrieved employees pursuant
28 to Labor Code section 2699 subdivision (i). The Settlement Agreement also provides for
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MOTION FOR PRELIMINARY APPROVAL OF CLASS ACTION SETTLEMENT
payment of attorney fees on behalf of the class in the additional amount of up to $160,000,
litigation costs of up to $10,000 (Settlement Agreement $12), and a $10,000 incentive award to
Plaintiff. (Settlement Agreement {§10c., 10m.) Finally, $12,500 is reserved to pay the costs of
administration, less than half the cost of the previous bid. (Settlement Agreement {1 0c.)
The Settlement Agreement provides the timetable for the sequence of events leading up
to final approval of the settlement. First, if the Court grants preliminary approval of the
settlement, twenty (20) days after such approval, Defendant will provide a database to the claims
administrator which will list for each class member his or her name, last known address, SSN,
dates of employment during the class period, and the number of paychecks/wage statements
10 issued. Within twenty (20) days after receipt of the database (up to 40 days after preliminary
11 approval), the claims administrator will mail the notice of class action. The notice shall be in
12 the form attached as Exhibit B to the Declaration of Theodore Tang. There is no claim form,
13 because the settlement does not require class members to make any claims to receive funds.
14 (Settlement Agreement {13.) After the notice is mailed, class members will have Sixty (60)
15 days to opt out of, or object to, the settlement”. (Settlement Agreement 415.) At the final
16 approval hearing, the parties will ask the court to enter judgment in accordance with the
17 settlement.
18 The Settlement Agreement does not constitute an admission of the merits of any claim by
19 Plaintiff and is entered into only for the purpose of settling the dispute. (Settlement Agreement
20 20.)
21 D. Proposed Distribution of Settlement Funds
22 Under the Settlement, Defendant will provide the Claims Administrator with data taken
23 from its payroll and business records. From this data, the Claims Administrator will obtain the
24 total number of wage statements issued to each class member. (Settlement Agreement ¥{10i.,
25 13a.) The Claims Administrator shall distribute the Net Settlement amount proportionately by
26
2 A notice that is returned to the Claims Administrator as undeliverable will be re-mailed to the forwarding address
27 provided, if any, within 15 days, Class members will therefore have a theoretical maximum of sixty (60) days to opt
our or object to the settlement.
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wage statement. (Settlement Agreement §10g.) The portion of the Settlement allotted as PAGA
penalties shall be divided 75% to the LWDA as required by statute and 25% to the class
members, apportioned in the same manner as above, for wage statements between April 11,
2017 and March 1, 2019. (Labor Code Section 2699 subdivision (i), Settlement Agreement
110i.) Checks that cannot be delivered or that are uncashed will revert to the cy pres
organization Legal Aid At Work. In no instance shall any settlement funds revert back to
Defendant.
TIL. ARGUMENT
10 A The Class Should be Certified for Settlement Purposes.
11 The proposed class satisfies the criteria for certification of a settlement class under
12 California law (see Code of Civil Procedure Section 382; see also Vasquez v. Superior Court
13 (1971) 4 Cal.3d 800, 820-21; see Dunk v. Ford Motor Co. (1996) 46 Cal.App.4th 1794): (1) the
14 people in the settlement class are ascertainable but are so numerous that joinder would be
15 impractical; (2) there is a commonality of interests between the Plaintiff and the members of the
16 settlement class; (3) there are questions of law and fact that are common to the settlement class,
17 and those claims predominate over individual questions; (4) the Plaintiff's claims are typical of
18 the claims of the absent settlement class members; and (5) Plaintiff will fairly and adequately
19 represent the interests of the absent settlement class members.?
20 Mi
21
22, 1 The Class is Ascertainable and Numerous
23 The proposed settlement class is comprised of those who worked for Defendant as
24 employees or independent contractors during the class period. Defendant has maintained pay,
25 scheduling, and other records from which these individuals may be identified. Since the class as
26
3 Defendant has stipulated to class certification being appropriate for settlement purposes only and reserves any and
27 all right to challenge class certification should settlement not be approved and should litigation proceed, (Settlement
Agreement § 4.)
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defined includes a// such workers, there will be no difficulty ascertaining the class from
Defendant's records. (See Bufil v. Dollar Financial Group, Inc. (2008) 162 Cal.App.4th 1193,
1206-08. [Rest Break class was ascertainable even where no records of rest breaks existed
because policy was applicable to all employees in the defined class; that some individual
employees may have had breaks anyway went to merits, not class certification.])
Although the members of the class are similarly situated and have common claims
arising from Defendant’s alleged Labor Code violations, they number approximately 866+
Individual litigation of their claims or joinder would not be practicable. “Where a question is of
common interest fo ‘many’ persons, an action may be maintained as a class action even where
10 the parties are numerous and it is in fact practicable to join them all.” (Rose v. City of Hayward
il (1981) 126 Cal.App.3d 926, 934.)
12 2. The Class Shares Common Interests and Common Questions of Law
13 and Fact
14 Plaintiff further contends that he and the members of the class suffered the same sort of
15 injuries in the same manner. The allegations regarding meal and rest breaks are that Defendant
16 had company-wide policies regarding such breaks that did not meet the minimum requirements
17 set forth in the applicable [WC Wage Order and Labor Code section 512.5 The overtime, sick
18 time, and wage statement claims are similarly based on company-wide policies or procedures
19 that were applicable to all employees equally. Waiting time penalties, Business and Professions
20 Code section 17200, and PAGA penalty claims are all derivative causes of action based on the
21 same key facts as the prior allegations, and therefore the questions of law and fact are the same.
22 3. Plaintiff's Claims are Typical of Class Members’ Claims
23 A well-defined community of interest makes Rushing’s claims typical of the class
24 members. Plaintiff worked for Defendant as a security guard, as most of Defendant’s employees
25 do, and was subject to the same policies and procedures as the rest of the employees. Nothing
26 4 The final number will be determined by records turned over to the claims administrator after preliminary approval.
27 5 Defendant denies this and all other allegations in the complaint. The allegations stated herein are described for the
purpose of describing the nature of the claims and should not be taken as an admission by Defendant of their truth.
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about Plaintiff's employment sets his claim apart from the rest of the class.
4 Plaintiff will Adequately Represent the Settlement Class
The representative Plaintiff has retained counsel qualified to conduct prosecution of the
class case. (See Richmondv Dart Indus, Inc. (1981) 29 Cal.3d 462, 478.) Plaintiff’s counsel are
experienced in prosecuting wage and hour and PAGA actions such as this one. Plaintiff's
counsel have litigated other class action cases in employment as well as automotive defects and
are familiar with the unique challenges such actions bring in litigation. The proposed class
representative Plaintiff has no conflicting interests with absent class members. Plaintiff and
each member of the proposed Settlement Class have a strong and nearly identical interest in
10 establishing liability on part of the Defendant. The representative Plaintiff has worked under the
11 alleged policies for approximately 3 years as a full-time employee and has suffered the same
12 type of injury as a result of those policies as the rest of the class.
13 B. The Proposed Settlement is Fair and Reasonable
14 California Courts strongly favor settlement. (Stambaugh v Superior Court (1976) 62
15 Cal.App.3d 231, 236.) In passing on class action settlements, the Court has broad powers to
16 determine whether a proposed settlement is fair under the circumstances of the case. (Mallick y.
17 Superior Court (1979) 89 Cal.App.3d 434, 438.) Rule of Court 3.769 sets for the procedure for
18 determining fairness of the settlement. This first step in this process is the preliminary approval.
19 At the preliminary stage, the court considers general settlement
terms. It reviews information on the arms-length nature of the
20 negotiation, any obvious signs of collusion, presence or absence of
conflicts within the class, and possible preferential treatment
21
within the class. The Court also determines whether the settlement
22 is likely to be approved at the hearing to be scheduled after notice.
23 (Cohelan, Cal. Class Actions (2017-2018 ed. 2017) § 9:10, p.395.)
24
25 Finally, “a presumption of fairness exists where: (1) the settlement is reached through
26 arm’s length bargaining; (2) investigation and discovery are sufficient to allow counsel and the
27 court to act intelligently; (3) counsel is experienced in similar litigation; and (4) the percentage
28 of objectors is small.” (Dunk, supra, 48 Cal.App.4th at 1802.) The settlement before the Court
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satisfies these requirements.
1 The Settlement Agreement Resulted From Thorough Discovery and
Arms-Length Negotiation By Experienced Counsel
First, there are no grounds to doubt the fairness of the settlement before the Court. The
Settlement Agreement was the product of thorough, protracted, arms-length negotiation by
experienced and informed counsel. (Tang Decl., ff 5-10; Starr Decl.) The settlement was
reached only after substantial discovery (formal and informal) and mediation with Jeffrey Ross,
an experienced employment law mediator. The negotiations were contentious; so much so in
fact that the parties called off the mediation altogether just before it was scheduled to occur.
10 (Tang Decl., € 10.) Only the intervention of the mediator salvaged at least a telephonic
li mediation which ultimately led to the settlement submitted here.
12 Even before mediation, the issue of the financial status of Defendant became the driving
13 factor in litigation. Although discovery on the merits of the claim make Plaintiff confident in
14 the strength of the case for liability and damages, a meritorious claim means nothing if
15 Defendant has no ability to satisfy a judgment. Discovery into the financial viability of the
16 company therefore quickly became the focus of the parties formal and informal discovery
17 efforts. Plaintiff's counsel reviewed numerous documents as to the financial viability of not
18 only the Defendant corporation, but also its CEO and largest shareholders. (Tang Decl., {10.)
19 2, The Proposed Settlement Amount and Timing are Fai
20 After review of the documentation, Plaintiff's counsel is satisfied that the settlement is
21 the best possible outcome to the class given the circumstances. A larger judgment, or terms that
22 would require payment in a more accelerated manor, would risk driving the company into
23 bankruptcy. If that happened, the substantial IRS tax debt owed by Defendant would likely
24 exhaust all of Defendant’s assets, leaving no recovery whatsoever for the class members®, 11
25 USC §507(a)(8).
26
© The class as defined ends March 1, 2019. Any claims for priority wages under the bankruptcy
27 code would at this point have to accrue on or after March 9, 2019. As a result, no class members
would be entitled to priority on class claims. 11 USC §507(a)(6).
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The IRS debt makes this situation different from other situations in which a class action
defendant faces the possibility of bankruptcy. Plaintiff's counsel are not shy of the possibility of
bankruptcy alone. By way of example, Plaintiff's counsel currently represents a putative class
in an action originally filed in Los Angeles Superior Court in which the defendant and related
entities filed for Chapter 11 bankruptcy in the Southern District of New York. (Rowe v. Laura
Geller Beauty, LLC, Case No. BC702685; In re: Glansaol Holdings Inc., Case No. 18-14102-
(MEW)). However, 11 USC §507(a)(8) would give the IRS the right to payment in full for their
tax claim before a single penny could be lawfully distributed to any class members’,
Even assuming Defendant does not enter bankruptcy, litigation of this case is not a
10 guarantee of payment for the individual class member’s claims. Defendants deny that there is
11 any liability whatsoever, and, in the absence of a settlement or bankruptcy, would presumably
12 vigorously defend any action, class or otherwise, alleging the violations alleged in the present
13 case, Were the case to be fully litigated, it could be years still before a final judgement and any
14 appeals resolve, all the while costs of litigation increase without any guarantee of success at the
15 end. Given this alternative, the settlement is fair and reasonable.
16 c. The Proposed Notice Fairly Apprises the Class Members of the Terms of the
17 Settlement and the Class Member Rights under the Settlement
18 Plaintiff requests that this Court approve the proposed plan and form of notice, attached
19 as Exhibit B to the Declaration of Theodore Tang. Plaintiff proposes that the claims
20 administrator mail the notice directly to the class members at their last known addresses as
21 provided by Defendant. Defendant keeps records of the address of its current employees, so
22 direct notice to those individuals has an extremely high chance of being successful. The address
23 information for former employees of Defendant is, at most, 4 years old. The Settlement
24 Agreement contemplates that those notices returned with a forwarding address will be so
25 forwarded, increasing the chance of those notices will be delivered to the intended recipients.
26
27 7 Again, with the possible exception of a maximum of two pay periods for some class members
pursuant to 11 USC §507(a)(6).
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MOTION FOR PRELIMINARY APPROVAL OF CLASS ACTION SETTLEMENT
The proposed notices identify the Plaintiff and the Defendant, as well as a description of
the lawsuit, the settlement class, the settlement amounts, the proposed plan of allocation and the
attorneys’ fees that Plaintiff's counsel may receive. The proposed notice also describes the
Settlement Agreement sufficiently to allow class members to make an informed choice to accept
or reject it. Finally, the proposed notices contain information on opting out of the class or
objecting to the settlement, as well as the schedule for the final approval hearing. In short, the
proposed notices describe the proposed settlement with enough specificity to allow class
members to make an informed choice whether to participate in it.
D The PAGA Settlement Should Be Approved
10 Labor Code section 2699(1){2) provides that “t]he superior court shall review and
ll approve any settlement of any civil action filed pursuant to this part.” Since the Settlement
12 Agreement includes a settlement of PAGA claims, it requires approval of the court.
13 1 Labor Code Section 2699 Notice Requirements Have Been Satisfied
14 Pursuant to Labor Code section 2699 subdivision (1), a PAGA Plaintiff must provide
15 copies of the complaint and settlement agreement to the LWDA via the same online system
16 established for submitting notices under Labor Code section 2699.3. Plaintifi’s counsel
17 provided a copy of the operative complaint to the LWDA on February 22, 2019. (Decl. of Tang
18 4] 11.) Acopy of the Settlement Agreement is being transmitted to the LWDA in the same
19 manner contemporaneously with filing this motion with the Court, as required by Labor Code
20 section 2699 subdivision (1)(2). Assuming the Court approves the settlement and enters
21 judgment accordingly, Plaintiff will file a copy of that judgment in the same manner with the
22 LWDA within 10 days of the entry of judgment.
23 2. The PAGA Settlement Is Fair
24 Notwithstanding the fact that PAGA has been in effect for more than a decade, there is a
25 paucity of case law setting forth criteria to evaluate the sufficiency of a PAGA settlement. The
26 United States District Court for the Northern District of California has stated that a PAGA
27 settlement must be “fair and adequate in view of the purposes and policies of the statute
28 [PAGA].” (O'Connor v. Uber Technologies, Inc. (N.D. Cal 2016) 201 F.Sup3d 1110, 1135.)
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MOTION FOR PRELIMINARY APPROVAL OF CLASS ACTION SETTLEMENT
The principal purpose of PAGA is the public purpose of deterrence. (Brown v. Superior Court
(2013) 216 Cal.App.4th 1302, 1320.) Thus, the $17,500 allocation to PAGA penalties, when
combined with the deterrent effect of the total class recovery, is a significant deterrent to both
Defendant specifically and all California employers generally from engaging in the same
behavior. (See e.g. Nordstrom Commission Cases (2010) 186 Cal.App.4th 576 [upholding a
class action settlement that attributed $0 to PAGA].)
Iv. CONCLUSION
Plaintiff respectfully submits that this proposed Settlement is fair, reasonable, an in the
best interests of the class. Plaintiff therefore respectfully requests this Court to (1) grant
10 preliminary approval of the Settlement; (2) certify the class solely for the purpose of completing
11 settlement; (3) approve the proposed form of Notice; (4) schedule the dissemination of Notice;
12 (5) schedule a hearing on final approval of the settlement within 120 days after preliminary
13 approval of this settlement agreement, at which class members may be heard; and (6) schedule a
14 hearing on Plaintiffs Counsel’s motion for an award of attorneys’ fees, litigation costs, and
15 request for class representative enhancement award
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17 Date: September 5, 2019 FRONTIER LAW CENTER
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Adam i Rose
21 Theodore R. Tang
Attorneys for Plaintiff
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James Rushing
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MOTION FOR PRELIMINARY APPROVAL OF CLASS ACTION SETTLEMENT
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Electronically oN “9/5/2019 Adam M. Rose, Esq. (210880) By. Isl Jennifer Tannous adam@frontierlawcenter,com Theodore R. Tang, Esq. (313294) theodore@frontierlawcenter.com Emanuel Starr, Esq. (319778) manny (@frontierlawcenter.com FRONTIER LAW CENTER 23901 Calabasas Road, STE 2074 Calabasas, CA 91302 Telephone: (818) 914-3433 Facsimile: (818) 914-3433 Attorneys for Plaintiff James Rushing SUPERIOR COURT OF CALIFORNIA 10 COUNTY OF SAN MATEO i 12 JAMES RUSHING, individually and on behalf Case No. 18-CTV-01808 of all others similarly situated, 13 CLASS ACTION Plaintiffs, PLAINTIFF JAMES RUSHING’S NOTICE 14 OF MOTION AND MOTION FOR Vv. 15 PRELIMINARY APPROVAL OF SECOND AMENDED CLASS ACTION SECURITY INTELLIGENCE SPECIALIST AND PAGA SETTLEMENT; 16 CORPORATION and DOES 1 to 100, MEMORANDUM OF POINTS AND AUTHORITIES; DECLARATION OF 17 Defendants. THEODORE TANG; [PROPOSED] ORDER GRANTING PRELIMINARY 18 APPROVAL 19 Date: September 12, 2019 Time: 11 a.m. 20 Dept: 2E 21 22 23 24 25 26 27 28 MOTION FOR PRELIMINARY APPROVAL OF CLASS ACTION SETTLEMENT TO ALL PARTIES AND THEIR ATTORNEYS OF RECORD: PLEASE TAKE NOTICE that on September 12, 2019 at 11:00 a.m. or as soon thereafter as may be heard in Department 2E of the Superior Court of California, County of San Mateo, located at 400 County Center, Redwood City, CA 94063, Plaintiff James Rushing will and hereby does move this Court for an Order: (1) Granting Preliminary Approval of Class Action and Representative Action Settlement of the above titled case; (2) Certifying the class as defined in the Second Amended Stipulation Re: Settlement as a class action for purposes of settlement only pursuant to California Code of Civil 10 Procedure section 382; il (3) Approving the proposed form notice to class members; 12 (4) Scheduling a hearing on final approval of the settlement at which class members may 13 be heard and; 14 (5) Scheduling a hearing on Plaintiff's counsel’s application for an award of fees and 15 litigation costs. 16 This motion is based on this notice, the memorandum of points and authorities, the 17 stipulation of settlement and release, the proposed notice to class members, the declarations and 18 exhibits attached hereto, the pleadings filed in the present case, and any other such evidence or 19 argument as may be presented at the hearing. 20 21 Date: September 5, 2019 FRONTIER LAW CENTER 22 23 24 Attorney for Plaintiff James Rushing 25 26 27 28 Page | MOTION FOR PRELIMINARY APPROVAL OF CLASS ACTION SETTLEMENT TABLE OF CONTENTS INTRODUCTION IL. FACTUAL BACKGROUND A Unlawful Labor Policies B The Labor Litigation Cc The Settlement Agreement D. Proposed Distribution of Settlement Funds Tl ARGUMENT 10 A The Class Should be Certified for Settlement Purposes. ........0.cccseeees 6 ll L The Class is Ascertainable and Numerous 12 2. The Class Shares Common Interests and Common Questions of Law and Fact. 13 3 Plaintiffs Claims are Typical of Class Members’ Claims 14 4 Plaintiff will Adequately Represent the Settlement Class 15 The Proposed Settlement is Fair and Reasonable 16 1 The Settlement Agreement Resulted From Thorough 17 Discovery and Arms-Length Negotiation By Experienced Counsel 18 2. The Proposed Settlement Amount and Timing are Fair 19 20 of the Settlement and the lass Mi The Proposed Notice Fairly Ap) rises the Class Members of the Terms lember Rights under the Settlement.. 10 21 The PAGA Settlement Should Be Approved 11 22 l Labor Code Section 2699 Notice"¢ Requirements HHave Been Satisfied... 11 23 2. The PAGA Settlement Is Fair 11 24 IV CONCLUSION 12 25 26 27 28 Page i MOTION FOR PRELIMINARY APPROVAL OF CLASS ACTION SETTLEMENT TABLE OF AUTHORITIES Cases Brown y. Superior Court (2013) 216 Cal.App.4th 1302 12 Bufil v. Dollar Financial Group, Inc. (2008) 162 Cal. App.4th 1193 Dunk v. Ford Motor Co. (1996) 46 Cal.App.4th 1794 6,8 In re: Glansaol Holdings Inc., Case No. 18-14102-(MEW).... 10 Mallick v. Superior Court (1979) 89 Cal.App.3d 434 Nordstrom Commission Cases (2010) 186 Cal.App.4th 576 12 O’Connor v. Uber Technologies, Inc. (N.D. Cal 2016) 201 F.Sup3d 1110 11 10 Richmond v Dart Indus, Inc. (1981) 29 Cal.3d 462 11 Rose v. City of Hayward (1981) 126 Cal. App.3d 926......0008 12 Rowe v. Laura Geller Beauty, LLC, Case No. BC702685 10 13 Stambaugh v Superior Court (1976) 62 Cal.App.3d 231 14 Vasquez v. Superior Court (1971) 4 Cal.3d 800... 15 Statutes 16 11 USC §507(a)(8) sessessecsee 17 Code of Civil Procedure Section 382... 18 Labor Code section 2699(1)(2) .. 11 19 Labor Code section 2699.3 .o.cccccecscecescsescseereessestssesteassieessescsnestatsestesssneeseesseensecsnsaene 11 20 to Labor Code section 2699 subdivision (1) ............ 11 21 Treatises 22 Cohelan, Cal. Class Actions (2017-2018 ed. 2017 ........ 23 24 25 26 27 28 Page ii MOTION FOR PRELIMINARY APPROVAL OF CLASS ACTION SETTLEMENT MEMORANDUM OF POINTS AND AUTHORITIES I INTRODUCTION This class action alleges violations under Labor Code sections 226, 512, 226.7, and 203 as well as Business and Professions Code section 17200 et seq (the “Unfair Competition Law”) and penalties under Labor Code section 2699 et seq (“PAGA”) on behalf of current and former security guards employed by SIS between April 11, 2014 and the date of preliminary approval of the settlement. The settlement obligates SIS to pay a total of $480,000 over four years, with $270,000 comprising the net settlement fund payable directly to the class, $17,500 as PAGA penalties, and $10,000 to be paid to Plaintiff Rushing as an incentive award. $12,500 is 10 budgeted to pay for claims administration. In addition, the settlement provides for payment of 11 $10,000 for litigation costs and $160,000 in attorneys’ fees. 12 This settlement differs in several significant ways from the initial settlement the Parties 13 sought approval on in March 2019. First, the class period now runs through March 1, 2019, 14 instead of the date of preliminary approval, so the size of the class can be determined now. 15 Second, additional discovery and analysis of the class data revealed that there were a significant 16 number of duplicate names in the data, such that the actual class size is 866, not over 1,400 as 17 originally believed. Third, the funds have been redistributed, reducing the amount assigned to 18 PAGA and claims administration and redirecting those funds into the Net Settlement amount for 19 the class. Fourth, the monthly payments have been adjusted such that the settlement will be 20 funded in 4 years instead of 5. Fifth, Legal Aid At Work, a San Francisco based non-profit that 21 provides legal assistance to employees facing the same kind of violation alleged in the present 22 case, has replaced Bet Tzedek as the cy pres organization to which unclaimed funds will revert. 23 This settlement is advantageous to the plaintiff class members and merits preliminary 24 approval. Defendant SIS is currently still in significant financial distress and at risk of falling 25 into bankruptcy. To further complicate matters, SIS’s biggest individual creditor (other than the 26 class) is the IRS, which holds a tax lien that would be entitled to priority in the event of a 27 bankruptcy. The priority IRS debt owed by SIS is sufficiently large that it creates a substantial 28 Page | MOTION FOR PRELIMINARY APPROVAL OF CLASS ACTION SETTLEMENT tisk that most class members would recover nothing whatsoever in the event of a bankruptcy. This settlement and payment structure will allow SIS to avoid bankruptcy and allow the plaintiff class to avoid this substantial risk and recover some compensation for the alleged violations. iL. FACTUAL BACKGROUND A Unlawful Labor Policies The litigation stems from SIS policies contrary to California employment law. SIS had a break policy that did not provide for 10-minute duty free rest breaks and 30-minute duty free meal periods as required by the Labor Code or 1WC Wage Order 4, or to provide premium pay in lieu of such breaks, or to pay employees for time spent working during these 30-minute 10 periods. SIS also provided piecemeal wage statements that failed to comply with the i requirements of Labor Code 226. Finally, SIS violated the Healthy Workers Healthy Families 12 Act, codified at Labor Code section 245 et seq, (the “HWHFA”) by denying employees the use 13 of paid sick time. Defendant denies these allegations and maintains that it followed and 14 continues to follow all California and Federal laws. 15 B. The Labor Litigation 16 On February 14, 2018, Plaintiff's counsel sent a written request to SIS via certified mail 17 requesting Plaintiffs employment records pursuant to Labor Code sections 226 and 1198.5, in 18 order to investigate Plaintiffs claims of unlawful labor practices there. Having received no 19 response, on March 16, 2018, Plaintiff, through counsel, sent notice to the LWDA and to SIS of 20 the intent to bring a PAGA claim on behalf of himself and all aggrieved employees for the 21 violations alleged in the present lawsuit. Having again received no response, Plaintiffs counsel 22 filed the initial complaint on April 11, 2018. 23 SIS answered the complaint on May 9, 2018, Shortly thereafter, the parties entered into 24 a stipulation to allow Plaintiff to file a First Amended Complaint that incorporated PAGA 25 allegations, which Plaintiff filed on June 5, 2018. Plaintiffs conducted discovery, which 26 1 While 11 U.S.C. § 507(4)(A) allows priority for wage claims over the IRS, it only does so for 27 wages (not civil penalties) earned in the 180 ys proceeding bankruptcy. As of the date of the hearing on this motion, 145 of those 180 days will have already expired. 28 Page 2 MOTION FOR PRELIMINARY APPROVAL OF CLASS ACTION SETTLEMENT included a review of almost 41,000 pages of records reflecting, schedules, hours worked, and payments made to class members within the class period. The parties agreed that the case was suitable for mediation and agreed to mediate the case before Jeffrey A. Ross. Plaintiff also conducted a deposition of the person most qualified for SIS with regard to the issues alleged in the complaint. During the PMQ deposition, counsel for SIS indicated that SIS had engaged a forensic accountant to review SIS’s finances and expressed a serious doubt about SIS’s ability to fund a substantial class award. For the remainder of the litigation, the focus on investigation and discovery shifted from liability and damages to SIS’s financial situation. SIS provided to 10 Plaintiffs counsel through informal discovery (and under a stipulated protected order), a series ll of financial documents, including: 12 ()) SIS’s tax filings for the last several years; 13 Q) Recent letters from the IRS confirming the status of a significant tax debt; 14 GB) Balance sheets and Profit & Loss statements; 15 (4) A report prepared by a forensic accountant detailing SIS’s ability to pay money 16 damages; 17 6) The principal owners’ personal tax filings for the last several years; and 18 (6) Documents related to property owned by the principal owner. 19 During this discovery process, the parties continued to negotiate aspects of the case. The 20 negotiations were contentious and complex. At one point, the mediation was canceled due to 21 concerns about SIS’s ability to pay awy amount. However, after conducting a telephonic 22 mediation with Mr. Ross, and several rounds of negotiations after, the parties finally reached a 23 Settlement Agreement. (Tang Declaration, 10.) Plaintiff filed a motion for preliminary 24 approval on March 4, 2019 25 On March 15, 2019 the court denied preliminary approval of that settlement. Among 26 issues raised by the court were the low amount of the Net Settlement Fund in relation to the 27 expected size of the class, the length of time before the settlement would be funded, and the cy 28 pres organizations lack of connection to the interest of the putative class members. Page 3 MOTION FOR PRELIMINARY APPROVAL OF CLASS ACTION SETTLEMENT The parties met and conferred in an attempt to resolve the issues, including follow up discovery. Specifically, Defendants provided to Plaintiffs counsel spreadsheet data identifying the class members, their hire and termination dates (if applicable), and the number of paychecks issued. In compiling this data, Defendants discovered that their original estimate of the class size accidentally double-counted a large number of individuals, resulting in an overestimated class size. In addition, about 15% of the class worked only a single pay period, and over half were issued 12 paychecks or less. Thus, the distribution of funds to full-time workers in the class is much more highly concentrated than originally believed. Cc. The Settlement Agreement 10 The Settlement Agreement provides for certification of a single class, defined as “All 11 individuals who worked in California for SIS [Defendant] as security guards during the period 12 of April 11, 2014 through March 1, 2019” (Settlement Agreement { 3.) The total amount of the 13 settlement is $480,000, to be paid in installments of not less than $8,000 per month until fully 14 funded ($8,000 per month in the first year, $10,000 per month in the second, $12,500 a month in 15 the third, and $9,500 per month in the fourth and final year). (Settlement Agreement, ff 8-9.) 16 SIS will pay the class $270,000 in cash distributed directly to the class members by the 17 claims administrator (the “Net Settlement Fund”). (Settlement Agreement {10 c.) This reflects a 18 $23,000 increase over the previous settlement agreement, achieved by obtaining a lower bid on 19 settlement administration and reducing the amount allocated to PAGA penalties. This is a non- 20 reversionary amount, and any unclaimed checks will revert to the cy pres organization Legal Aid 21 At Work which, among other services, provides workers direct representation helps workers 22 know their rights, provides guidance to workers in how to represent themselves before the Labor 23 Commissioner, and provide other legal services to workers facing wage theft and other 24 violations similar to the violations the class is alleged to have suffered in this case. They are a 25 local organization and perform these services here in the bay area. (Settlement Agreement 410 26 h.) In addition to the $270,000 Net Settlement Fund, SIS will pay $17,500 in PAGA penalties, 27 distributed 75% ($13,125) to the LWDA and 25% ($4,375) to the aggrieved employees pursuant 28 to Labor Code section 2699 subdivision (i). The Settlement Agreement also provides for Page 4 MOTION FOR PRELIMINARY APPROVAL OF CLASS ACTION SETTLEMENT payment of attorney fees on behalf of the class in the additional amount of up to $160,000, litigation costs of up to $10,000 (Settlement Agreement $12), and a $10,000 incentive award to Plaintiff. (Settlement Agreement {§10c., 10m.) Finally, $12,500 is reserved to pay the costs of administration, less than half the cost of the previous bid. (Settlement Agreement {1 0c.) The Settlement Agreement provides the timetable for the sequence of events leading up to final approval of the settlement. First, if the Court grants preliminary approval of the settlement, twenty (20) days after such approval, Defendant will provide a database to the claims administrator which will list for each class member his or her name, last known address, SSN, dates of employment during the class period, and the number of paychecks/wage statements 10 issued. Within twenty (20) days after receipt of the database (up to 40 days after preliminary 11 approval), the claims administrator will mail the notice of class action. The notice shall be in 12 the form attached as Exhibit B to the Declaration of Theodore Tang. There is no claim form, 13 because the settlement does not require class members to make any claims to receive funds. 14 (Settlement Agreement {13.) After the notice is mailed, class members will have Sixty (60) 15 days to opt out of, or object to, the settlement”. (Settlement Agreement 415.) At the final 16 approval hearing, the parties will ask the court to enter judgment in accordance with the 17 settlement. 18 The Settlement Agreement does not constitute an admission of the merits of any claim by 19 Plaintiff and is entered into only for the purpose of settling the dispute. (Settlement Agreement 20 20.) 21 D. Proposed Distribution of Settlement Funds 22 Under the Settlement, Defendant will provide the Claims Administrator with data taken 23 from its payroll and business records. From this data, the Claims Administrator will obtain the 24 total number of wage statements issued to each class member. (Settlement Agreement ¥{10i., 25 13a.) The Claims Administrator shall distribute the Net Settlement amount proportionately by 26 2 A notice that is returned to the Claims Administrator as undeliverable will be re-mailed to the forwarding address 27 provided, if any, within 15 days, Class members will therefore have a theoretical maximum of sixty (60) days to opt our or object to the settlement. 28 Page 5 MOTION FOR PRELIMINARY APPROVAL OF CLASS ACTION SETTLEMENT wage statement. (Settlement Agreement §10g.) The portion of the Settlement allotted as PAGA penalties shall be divided 75% to the LWDA as required by statute and 25% to the class members, apportioned in the same manner as above, for wage statements between April 11, 2017 and March 1, 2019. (Labor Code Section 2699 subdivision (i), Settlement Agreement 110i.) Checks that cannot be delivered or that are uncashed will revert to the cy pres organization Legal Aid At Work. In no instance shall any settlement funds revert back to Defendant. TIL. ARGUMENT 10 A The Class Should be Certified for Settlement Purposes. 11 The proposed class satisfies the criteria for certification of a settlement class under 12 California law (see Code of Civil Procedure Section 382; see also Vasquez v. Superior Court 13 (1971) 4 Cal.3d 800, 820-21; see Dunk v. Ford Motor Co. (1996) 46 Cal.App.4th 1794): (1) the 14 people in the settlement class are ascertainable but are so numerous that joinder would be 15 impractical; (2) there is a commonality of interests between the Plaintiff and the members of the 16 settlement class; (3) there are questions of law and fact that are common to the settlement class, 17 and those claims predominate over individual questions; (4) the Plaintiff's claims are typical of 18 the claims of the absent settlement class members; and (5) Plaintiff will fairly and adequately 19 represent the interests of the absent settlement class members.? 20 Mi 21 22, 1 The Class is Ascertainable and Numerous 23 The proposed settlement class is comprised of those who worked for Defendant as 24 employees or independent contractors during the class period. Defendant has maintained pay, 25 scheduling, and other records from which these individuals may be identified. Since the class as 26 3 Defendant has stipulated to class certification being appropriate for settlement purposes only and reserves any and 27 all right to challenge class certification should settlement not be approved and should litigation proceed, (Settlement Agreement § 4.) 28 Page 6 MOTION FOR PRELIMINARY APPROVAL OF CLASS ACTION SETTLEMENT defined includes a// such workers, there will be no difficulty ascertaining the class from Defendant's records. (See Bufil v. Dollar Financial Group, Inc. (2008) 162 Cal.App.4th 1193, 1206-08. [Rest Break class was ascertainable even where no records of rest breaks existed because policy was applicable to all employees in the defined class; that some individual employees may have had breaks anyway went to merits, not class certification.]) Although the members of the class are similarly situated and have common claims arising from Defendant’s alleged Labor Code violations, they number approximately 866+ Individual litigation of their claims or joinder would not be practicable. “Where a question is of common interest fo ‘many’ persons, an action may be maintained as a class action even where 10 the parties are numerous and it is in fact practicable to join them all.” (Rose v. City of Hayward il (1981) 126 Cal.App.3d 926, 934.) 12 2. The Class Shares Common Interests and Common Questions of Law 13 and Fact 14 Plaintiff further contends that he and the members of the class suffered the same sort of 15 injuries in the same manner. The allegations regarding meal and rest breaks are that Defendant 16 had company-wide policies regarding such breaks that did not meet the minimum requirements 17 set forth in the applicable [WC Wage Order and Labor Code section 512.5 The overtime, sick 18 time, and wage statement claims are similarly based on company-wide policies or procedures 19 that were applicable to all employees equally. Waiting time penalties, Business and Professions 20 Code section 17200, and PAGA penalty claims are all derivative causes of action based on the 21 same key facts as the prior allegations, and therefore the questions of law and fact are the same. 22 3. Plaintiff's Claims are Typical of Class Members’ Claims 23 A well-defined community of interest makes Rushing’s claims typical of the class 24 members. Plaintiff worked for Defendant as a security guard, as most of Defendant’s employees 25 do, and was subject to the same policies and procedures as the rest of the employees. Nothing 26 4 The final number will be determined by records turned over to the claims administrator after preliminary approval. 27 5 Defendant denies this and all other allegations in the complaint. The allegations stated herein are described for the purpose of describing the nature of the claims and should not be taken as an admission by Defendant of their truth. 28 Page 7 MOTION FOR PRELIMINARY APPROVAL OF CLASS ACTION SETTLEMENT about Plaintiff's employment sets his claim apart from the rest of the class. 4 Plaintiff will Adequately Represent the Settlement Class The representative Plaintiff has retained counsel qualified to conduct prosecution of the class case. (See Richmondv Dart Indus, Inc. (1981) 29 Cal.3d 462, 478.) Plaintiff’s counsel are experienced in prosecuting wage and hour and PAGA actions such as this one. Plaintiff's counsel have litigated other class action cases in employment as well as automotive defects and are familiar with the unique challenges such actions bring in litigation. The proposed class representative Plaintiff has no conflicting interests with absent class members. Plaintiff and each member of the proposed Settlement Class have a strong and nearly identical interest in 10 establishing liability on part of the Defendant. The representative Plaintiff has worked under the 11 alleged policies for approximately 3 years as a full-time employee and has suffered the same 12 type of injury as a result of those policies as the rest of the class. 13 B. The Proposed Settlement is Fair and Reasonable 14 California Courts strongly favor settlement. (Stambaugh v Superior Court (1976) 62 15 Cal.App.3d 231, 236.) In passing on class action settlements, the Court has broad powers to 16 determine whether a proposed settlement is fair under the circumstances of the case. (Mallick y. 17 Superior Court (1979) 89 Cal.App.3d 434, 438.) Rule of Court 3.769 sets for the procedure for 18 determining fairness of the settlement. This first step in this process is the preliminary approval. 19 At the preliminary stage, the court considers general settlement terms. It reviews information on the arms-length nature of the 20 negotiation, any obvious signs of collusion, presence or absence of conflicts within the class, and possible preferential treatment 21 within the class. The Court also determines whether the settlement 22 is likely to be approved at the hearing to be scheduled after notice. 23 (Cohelan, Cal. Class Actions (2017-2018 ed. 2017) § 9:10, p.395.) 24 25 Finally, “a presumption of fairness exists where: (1) the settlement is reached through 26 arm’s length bargaining; (2) investigation and discovery are sufficient to allow counsel and the 27 court to act intelligently; (3) counsel is experienced in similar litigation; and (4) the percentage 28 of objectors is small.” (Dunk, supra, 48 Cal.App.4th at 1802.) The settlement before the Court Page 8 MOTION FOR PRELIMINARY APPROVAL OF CLASS ACTION SETTLEMENT satisfies these requirements. 1 The Settlement Agreement Resulted From Thorough Discovery and Arms-Length Negotiation By Experienced Counsel First, there are no grounds to doubt the fairness of the settlement before the Court. The Settlement Agreement was the product of thorough, protracted, arms-length negotiation by experienced and informed counsel. (Tang Decl., ff 5-10; Starr Decl.) The settlement was reached only after substantial discovery (formal and informal) and mediation with Jeffrey Ross, an experienced employment law mediator. The negotiations were contentious; so much so in fact that the parties called off the mediation altogether just before it was scheduled to occur. 10 (Tang Decl., € 10.) Only the intervention of the mediator salvaged at least a telephonic li mediation which ultimately led to the settlement submitted here. 12 Even before mediation, the issue of the financial status of Defendant became the driving 13 factor in litigation. Although discovery on the merits of the claim make Plaintiff confident in 14 the strength of the case for liability and damages, a meritorious claim means nothing if 15 Defendant has no ability to satisfy a judgment. Discovery into the financial viability of the 16 company therefore quickly became the focus of the parties formal and informal discovery 17 efforts. Plaintiff's counsel reviewed numerous documents as to the financial viability of not 18 only the Defendant corporation, but also its CEO and largest shareholders. (Tang Decl., {10.) 19 2, The Proposed Settlement Amount and Timing are Fai 20 After review of the documentation, Plaintiff's counsel is satisfied that the settlement is 21 the best possible outcome to the class given the circumstances. A larger judgment, or terms that 22 would require payment in a more accelerated manor, would risk driving the company into 23 bankruptcy. If that happened, the substantial IRS tax debt owed by Defendant would likely 24 exhaust all of Defendant’s assets, leaving no recovery whatsoever for the class members®, 11 25 USC §507(a)(8). 26 © The class as defined ends March 1, 2019. Any claims for priority wages under the bankruptcy 27 code would at this point have to accrue on or after March 9, 2019. As a result, no class members would be entitled to priority on class claims. 11 USC §507(a)(6). 28 Page 9 MOTION FOR PRELIMINARY APPROVAL OF CLASS ACTION SETTLEMENT The IRS debt makes this situation different from other situations in which a class action defendant faces the possibility of bankruptcy. Plaintiff's counsel are not shy of the possibility of bankruptcy alone. By way of example, Plaintiff's counsel currently represents a putative class in an action originally filed in Los Angeles Superior Court in which the defendant and related entities filed for Chapter 11 bankruptcy in the Southern District of New York. (Rowe v. Laura Geller Beauty, LLC, Case No. BC702685; In re: Glansaol Holdings Inc., Case No. 18-14102- (MEW)). However, 11 USC §507(a)(8) would give the IRS the right to payment in full for their tax claim before a single penny could be lawfully distributed to any class members’, Even assuming Defendant does not enter bankruptcy, litigation of this case is not a 10 guarantee of payment for the individual class member’s claims. Defendants deny that there is 11 any liability whatsoever, and, in the absence of a settlement or bankruptcy, would presumably 12 vigorously defend any action, class or otherwise, alleging the violations alleged in the present 13 case, Were the case to be fully litigated, it could be years still before a final judgement and any 14 appeals resolve, all the while costs of litigation increase without any guarantee of success at the 15 end. Given this alternative, the settlement is fair and reasonable. 16 c. The Proposed Notice Fairly Apprises the Class Members of the Terms of the 17 Settlement and the Class Member Rights under the Settlement 18 Plaintiff requests that this Court approve the proposed plan and form of notice, attached 19 as Exhibit B to the Declaration of Theodore Tang. Plaintiff proposes that the claims 20 administrator mail the notice directly to the class members at their last known addresses as 21 provided by Defendant. Defendant keeps records of the address of its current employees, so 22 direct notice to those individuals has an extremely high chance of being successful. The address 23 information for former employees of Defendant is, at most, 4 years old. The Settlement 24 Agreement contemplates that those notices returned with a forwarding address will be so 25 forwarded, increasing the chance of those notices will be delivered to the intended recipients. 26 27 7 Again, with the possible exception of a maximum of two pay periods for some class members pursuant to 11 USC §507(a)(6). 28 Page 10 MOTION FOR PRELIMINARY APPROVAL OF CLASS ACTION SETTLEMENT The proposed notices identify the Plaintiff and the Defendant, as well as a description of the lawsuit, the settlement class, the settlement amounts, the proposed plan of allocation and the attorneys’ fees that Plaintiff's counsel may receive. The proposed notice also describes the Settlement Agreement sufficiently to allow class members to make an informed choice to accept or reject it. Finally, the proposed notices contain information on opting out of the class or objecting to the settlement, as well as the schedule for the final approval hearing. In short, the proposed notices describe the proposed settlement with enough specificity to allow class members to make an informed choice whether to participate in it. D The PAGA Settlement Should Be Approved 10 Labor Code section 2699(1){2) provides that “t]he superior court shall review and ll approve any settlement of any civil action filed pursuant to this part.” Since the Settlement 12 Agreement includes a settlement of PAGA claims, it requires approval of the court. 13 1 Labor Code Section 2699 Notice Requirements Have Been Satisfied 14 Pursuant to Labor Code section 2699 subdivision (1), a PAGA Plaintiff must provide 15 copies of the complaint and settlement agreement to the LWDA via the same online system 16 established for submitting notices under Labor Code section 2699.3. Plaintifi’s counsel 17 provided a copy of the operative complaint to the LWDA on February 22, 2019. (Decl. of Tang 18 4] 11.) Acopy of the Settlement Agreement is being transmitted to the LWDA in the same 19 manner contemporaneously with filing this motion with the Court, as required by Labor Code 20 section 2699 subdivision (1)(2). Assuming the Court approves the settlement and enters 21 judgment accordingly, Plaintiff will file a copy of that judgment in the same manner with the 22 LWDA within 10 days of the entry of judgment. 23 2. The PAGA Settlement Is Fair 24 Notwithstanding the fact that PAGA has been in effect for more than a decade, there is a 25 paucity of case law setting forth criteria to evaluate the sufficiency of a PAGA settlement. The 26 United States District Court for the Northern District of California has stated that a PAGA 27 settlement must be “fair and adequate in view of the purposes and policies of the statute 28 [PAGA].” (O'Connor v. Uber Technologies, Inc. (N.D. Cal 2016) 201 F.Sup3d 1110, 1135.) Page 11 MOTION FOR PRELIMINARY APPROVAL OF CLASS ACTION SETTLEMENT The principal purpose of PAGA is the public purpose of deterrence. (Brown v. Superior Court (2013) 216 Cal.App.4th 1302, 1320.) Thus, the $17,500 allocation to PAGA penalties, when combined with the deterrent effect of the total class recovery, is a significant deterrent to both Defendant specifically and all California employers generally from engaging in the same behavior. (See e.g. Nordstrom Commission Cases (2010) 186 Cal.App.4th 576 [upholding a class action settlement that attributed $0 to PAGA].) Iv. CONCLUSION Plaintiff respectfully submits that this proposed Settlement is fair, reasonable, an in the best interests of the class. Plaintiff therefore respectfully requests this Court to (1) grant 10 preliminary approval of the Settlement; (2) certify the class solely for the purpose of completing 11 settlement; (3) approve the proposed form of Notice; (4) schedule the dissemination of Notice; 12 (5) schedule a hearing on final approval of the settlement within 120 days after preliminary 13 approval of this settlement agreement, at which class members may be heard; and (6) schedule a 14 hearing on Plaintiffs Counsel’s motion for an award of attorneys’ fees, litigation costs, and 15 request for class representative enhancement award 16 17 Date: September 5, 2019 FRONTIER LAW CENTER 18 19 20 Se Adam i Rose 21 Theodore R. Tang Attorneys for Plaintiff 22 James Rushing 23 24 25 26 27 28 Page I2 MOTION FOR PRELIMINARY APPROVAL OF CLASS ACTION SETTLEMENT