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Calendar Line 4 Envelope: 4717069
Case Name: Thompson Ly v. Sage Intacct, Inc., et al.
Case No.: 18CV334378
This is a putative class action on behalf of employees of defendant Sage Intacct,
Inc., alleging misclassification of certain employees and resulting wage and hour
violations. Before the Court is plaintiff's motion for preliminary approval of a
settlement, which is unopposed.
I. Factual and Procedural Background
As alleged in the operative complaint, plaintiff worked for Sage as an Inbound
Sales Development Representative, also known as a Sales Development Representative,
from October 2016 to May 2017. (Complaint, {| 12-13.) His duties included calling on
potential customers and qualifying marketing-generated leads, discussing defendant’s
cloud accounting and ERP software with potential customers, generating new business
opportunities, and selling cloud accounting and ERP software to small to mid-size
businesses. (/bid.) Plaintiff was paid a base salary, plus variable commissions. (Jbid.)
However, he alleges that he and other class members were regularly scheduled to work
overtime without receiving straight time or overtime compensation, because they are
properly classified as nonexempt employees. (/d., 14.) As a result of defendant’s
failure to pay these wages, class members also did not receive all wages owed at the time
of separation and are entitled to waiting time penalties. (/d., {| 32.)
Based on these allegations, plaintiff brings putative class claims for (1) violation
of Labor Code sections 510 and 1194, (2) restitution pursuant to Business & Professions
Code section 17203, and (3) waiting time penalties pursuant to Labor Code section 203.
The parties have now reached a settlement. Plaintiff moves for an order
preliminarily approving the settlement, provisionally certifying the settlement class,
approving the form and method for providing notice to the class, and scheduling a final
fairness hearing.
II. Legal Standards for Approving a Class Action Settlement
Generally, “questions whether a settlement was fair and reasonable, whether
notice to the class was adequate, whether certification of the class was proper, and
whether the attorney fee award was proper are matters addressed to the trial court’s broad
discretion.” (Wershba v. Apple Computer, Inc. (2001) 91 Cal.App.4th 224, 234-235,
citing Dunk v. Ford Motor Co. (1996) 48 Cal.App.4th 1794, disapproved of on other
grounds by Hernandez v. Restoration Hardware, Inc. (2018) 4 Cal.5th 260.)
In determining whether a class settlement is fair, adequate and reasonable,
the trial court should consider relevant factors, such as the strength of
plaintiffs’ case, the risk, expense, complexity and likely duration of further
litigation, the risk of maintaining class action status through trial, the
amount offered in settlement, the extent of discovery completed and the
stage of the proceedings, the experience and views of counsel, the
presence of a governmental participant, and the reaction of the class
members to the proposed settlement.
(Wershba v. Apple Computer, Inc., supra, 91 Cal.App.4th at pp. 244-245, internal
citations and quotations omitted.)
In general, the most important factor is the strength of plaintiffs’ case on the
merits, balanced against the amount offered in settlement. (See Kullar v. Foot Locker
Retail, Inc. (2008) 168 Cal.App.4th 116, 130.) Still, the list of factors is not exclusive
and the court is free to engage in a balancing and weighing of factors depending on the
circumstances of each case. (Wershba v. Apple Computer, Inc., supra, 91 Cal.App.4th at
p. 245.) The court must examine the “proposed settlement agreement to the extent
necessary to reach a reasoned judgment that the agreement is not the product of fraud or
overreaching by, or collusion between, the negotiating parties, and that the settlement,
taken as a whole, is fair, reasonable and adequate to all concerned.” (Jbid., quoting Dunk
v. Ford Motor Co., supra, 48 Cal.App.4th at p. 1801, internal quotation marks omitted.)
The burden is on the proponent of the settlement to show that it is fair
and reasonable. However “a presumption of fairness exists where: (1) the
settlement is reached through arm’s-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.”
(Wershba v. Apple Computer, Inc., supra, 91 Cal.App.4th at p. 245, citing Dunk v. Ford
Motor Co., supra, 48 Cal.App.4th at p. 1802.) The presumption does not permit the
Court to “give rubber-stamp approval” to a settlement; in all cases, it must
“independently and objectively analyze the evidence and circumstances before it in order
to determine whether the settlement is in the best interests of those whose claims will be
extinguished,” based on a sufficiently developed factual record. (Kullar v. Foot Locker
Retail, Inc., supra, 168 Cal.App.4th at p. 130.)
III. Settlement Process
Plaintiff served initial discovery requests in March 2019, and multiple discovery
disputes developed. The parties participated in an informal discovery conference
(“IDC”) with the Court on August 14, 2019, and reached an agreement regarding some
disputes, at which point defendant produced approximately 1,200 documents. More
disputes arose, and a second IDC was held on November 4, 2019. Defendant produced
approximately 11,000 additional documents, and plaintiff agreed to delete confidential
information he retained after his termination and produce certain electronically stored
information. During this period, both plaintiff and defendant prepared and served
numerous amended discovery responses. Defendant deposed plaintiff on November 19,
2019, but did not complete the deposition.
In January 2020, the parties began to discuss mediation, and they stipulated to
stay the case and vacate case deadlines. On April 15, 2020, in light of the COVID-19
pandemic, they conducted a virtual mediation with Francis “Tripper” Ortman III.
Defendant provided substantial information about the claims alleged by plaintiff,
including payroll data, Salesforce data, and parking badge data. After mediating late into
the evening, the parties were able to reach the agreement before the Court.
IV. Provisions of the Settlement
The non-reversionary gross settlement amount is $ 1,100,000. Attorney fees of up
to $ 366,666 (one-third of the gross settlement), litigation costs not to exceed $15,000,
and administration costs of $5,750 will be paid from the gross settlement. The named
plaintiff will also seek an enhancement award of $7,500.
The net settlement, approximately $705,084, will be distributed to individual class
members pro rata based on their weeks worked during the class period. Class members
whose employment was terminated during the class period will receive credit for an
additional four workweeks. The average settlement payment will be approximately
$7,922.29 to each of the 89 class members, and class members will not be required to
submit a claim to receive their payments. Settlement awards will be allocated 1/3 to
unpaid wages and 2/3 to interest and penalties. Defendant will pay its share of payroll
taxes in addition to the gross settlement amount. Funds associated with checks uncashed
after 180 days will be redistributed among participating class members. Any
redistribution checks that remain uncased after 90 days will be deposited with the State of
California unclaimed property fund in the name of the class member who received the
redistribution.
Class members who do not opt out of the settlement will release claims (1) that
were pled in the complaint; (2) “[t]hat could have been alleged by Plaintiff or any
Settlement Class Member under the facts pled in the Complaint including, but not limited
to, any claims for penalties (statutory, civil or otherwise) associated with the alleged
failure to pay compensation for all hours worked (including minimum wages and
overtime wages), waiting time penalties, and violation(s) of Business and Professions
Code section 17200 et seq.”; or (3) that first arose or existed during the class period with
respect to “a) Any claims for failure to pay compensation for all hours worked (including
minimum wages and overtime wages) in accordance with the California Labor Code
and/or applicable Wage Orders; b) Any claims for the failure to pay waiting time
penalties; c) Any claims for equitable relief, declaratory relief, liquidated damages,
restitution, or unfair business practices alleged or which could have been alleged in
connection with the alleged failure to pay for all wages owed (including minimum wages
and overtime wages) and waiting time penalties; and d) Any claims for attorneys’ fees,
interest, or penalties in connection with the failure to provide meal periods, failure to pay
for all wages owed (including minimum wages and overtime wages) and waiting time
penalties.”
The Court assumes that the reference to claims for failure to provide meal periods
in the last subsection of the release is in error. Plaintiffs counsel shall address this issue
in a supplemental declaration to be filed prior to the hearing on this matter if possible.
V. Fairness of the Settlement
Plaintiff believes he has a strong case at class certification and on the merits based
on discovery regarding the application of the administrative exemption in this case.
However, defendant maintains that the class members were properly classified, and some
or all of them were not primarily engaged in sales but instead advised management,
negotiated or represented Sage, or conducted business research. It also asserts that its
incentive plan is a bona fide commission plan that would support its commissioned sales
exemption defense, at least as to some class members.
Plaintiff estimates that, after the deductions from the gross settlement described
above, class members will recover the value of approximately 2.1 hours of overtime per
week. Based on his investigation, he concluded that class members worked an average of
7.6 hours of overtime, and submits that the settlement represents a fair and reasonable
compromise of their claims. The Court is inclined to agree with this assessment. Still,
plaintiff's counsel must provide a supplemental declaration addressing the potential value
of the claims at issue, including the penalty claims, so that the Court may “independently
and objectively” analyze the settlement before it (Kullar v. Foot Locker Retail, Inc.,
supra, 168 Cal.App.4th at p. 130).
In addition, the Court retains an independent right and responsibility to review the
requested attorney fees and award only so much as it determines to be reasonable. (See
Garabedian v. Los Angeles Cellular Telephone Co. (2004) 118 Cal.App.4th 123, 127-
128.) While 1/3 of the common fund for attorney fees is generally considered reasonable,
counsel shall submit lodestar information prior to the final approval hearing in this matter
so the Court can compare the lodestar information with the requested fees. (See Laffitte
v. Robert Half Intern. Inc. (2016) 1 Cal.5th 480, 504 [trial courts have discretion to
double-check the reasonableness of a percentage fee through a lodestar calculation].)
VI. Proposed Settlement Clas:
Plaintiff requests that the following settlement class be provisionally certified:
all persons who are employed or have been employed as exempt by Sage Intacct,
Inc. in the State of California as a:
e Sales Development Representative from September 12, 2014 through July
31, 2018; and/or
e Corporate Account Manager from September 12, 2014 through July 15,
2020 or the date the Court grants preliminary approval, whichever date is
earlier.
A. Legal Standard for Certifying a Class for Settlement Purposes
Rule 3.769(d) of the California Rules of Court states that “[t]he court may make
an order approving or denying certification of a provisional settlement class after [a]
preliminary settlement hearing.” California Code of Civil Procedure Section 382
authorizes certification of a class “when the question is one of a common or general
interest, of many persons, or when the parties are numerous, and it is impracticable to
bring them all before the court ....” As interpreted by the California Supreme Court,
Section 382 requires the plaintiff to demonstrate by a preponderance of the evidence
(1) an ascertainable class and (2) a well-defined community of interest among the class
members. (Sav-On Drug Stores, Inc. v. Superior Court (Rocher) (2004) 34 Cal.4th 319,
326, 332.)
The “community-of-interest” requirement encompasses three factors:
(1) predominant questions of law or fact, (2) class representatives with claims or defenses
typical of the class, and (3) class representatives who can adequately represent the class.
(Ibid.) “Other relevant considerations include the probability that each class member
will come forward ultimately to prove his or her separate claim to a portion of the total
recovery and whether the class approach would actually serve to deter and redress alleged
wrongdoing.” (Linder v. Thrifty Oil Co. (2000) 23 Cal.4th 429, 435.) The plaintiff has
the burden of establishing that class treatment will yield “substantial benefits” to both
“the litigants and to the court.” (Blue Chip Stamps v. Superior Court (Botney) (1976) 18
Cal.3d 381, 385.)
In the settlement context, “the court’s evaluation of the certification issues is
somewhat different from its consideration of certification issues when the class action has
not yet settled.” (Luckey v. Superior Court (Cotton On USA, Inc.) (2014) 228
Cal.App.4th 81, 93.) As no trial is anticipated in the settlement-only context, the case
management issues inherent in the ascertainable class determination need not be
confronted, and the court’s review is more lenient in this respect. (Jd. at pp. 93-94.)
However, considerations designed to protect absentees by blocking unwarranted or
overbroad class definitions require heightened scrutiny in the settlement-only class
context, since the court will lack the usual opportunity to adjust the class as proceedings
unfold. (/d. at p. 94.)
B. Ascertainable Class
“The trial court must determine whether the class is ascertainable by examining
(1) the class definition, (2) the size of the class and (3) the means of identifying class
members.” (Miller v. Woods (1983) 148 Cal.App.3d 862, 873.) “Class members are
‘ascertainable’ where they may be readily identified without unreasonable expense or
time by reference to official records.” (Rose v. City of Hayward (1981) 126 Cal.App.3d
926, 932.)
Here, the estimated 89 class members have already been identified based on
defendant’s records, and the settlement class is clearly defined. The Court finds that the
settlement class is numerous and ascertainable. The class also appears to be
appropriately defined, assuming that defendant no longer employed “Sales Development
Representatives” after July 31, 2018. Counsel shall address this issue in the supplemental
declaration to be filed with the Court.
C. Community of Interest
With respect to the first community of interest factor, “[i]n order to determine
whether common questions of fact predominate the trial court must examine the issues
framed by the pleadings and the law applicable to the causes of action alleged.” (Hicks v.
Kaufman & Broad Home Corp. (2001) 89 Cal.App.4th 908, 916.) The court must also
give due weight to any evidence of a conflict of interest among the proposed class
members. (See J.P. Morgan & Co., Inc. v. Superior Court (Heliotrope General, Inc.)
(2003) 113 Cal.App.4th 195, 215.) The ultimate question is whether the issues which
may be jointly tried, when compared with those requiring separate adjudication, are so
numerous or substantial that the maintenance of a class action would be advantageous to
the judicial process and to the litigants. (Lockheed Martin Corp. v. Superior Court,
supra, 29 Cal.4th at pp. 1104-1105.) “As a general rule if the defendant’s liability can be
determined by facts common to all members of the class, a class will be certified even if
the members must individually prove their damages.” (Hicks v. Kaufman & Broad Home
Corp., supra, 89 Cal.App.4th at p. 916.)
Here, common legal and factual issues predominate. Plaintiff's claims all arise
from defendants’ wage and hour practices applied to the similarly-situated class
members.
As to the second factor,
The typicality requirement is meant to ensure that the class representative
is able to adequately represent the class and focus on common issues. It is
only when a defense unique to the class representative will be a major
focus of the litigation, or when the class representative’s interests are
antagonistic to or in conflict with the objectives of those she purports to
represent that denial of class certification is appropriate. But even then, the
court should determine if it would be feasible to divide the class into
subclasses to eliminate the conflict and allow the class action to be
maintained.
(Medrazo v. Honda of North Hollywood (2008) 166 Cal. App. 4th 89, 99, internal
citations, brackets, and quotation marks omitted.)
Like other members of the class, plaintiff was employed by defendant in one of
the positions at issue and alleges he experienced the violations alleged. The anticipated
defenses are not unique to plaintiff, and there is no indication that his interests are
otherwise in conflict with those of the class.
Finally, adequacy of representation “depends on whether the plaintiff's attorney is
qualified to conduct the proposed litigation and the plaintiff’s interests are not
antagonistic to the interests of the class.” (McGhee v. Bank of America (1976) 60
Cal.App.3d 442, 450.) The class representative does not necessarily have to incur all of
the damages suffered by each different class member in order to provide adequate
representation to the class. (Wershba v. Apple Computer, Inc. (2001) 91 Cal.App.4th
224, 238.) “Differences in individual class members’ proof of damages [are] not fatal to
class certification. Only a conflict that goes to the very subject matter of the litigation
will defeat a party’s claim of representative status.” (/bid., internal citations and
quotation marks omitted.)
Plaintiff has the same interest in maintaining this action as any class member
would have. Further, he has hired experienced counsel. Plaintiff has sufficiently
demonstrated adequacy of representation.
D. Substantial Benefits of Class Certification
“[A] class action should not be certified unless substantial benefits accrue both to
litigants and the courts. .. .” (Basurco v. 21st Century Ins. (2003) 108 Cal.App.4th 110,
120, internal quotation marks omitted.) The question is whether a class action would be
superior to individual lawsuits. (/bid.) “Thus, even if questions of law or fact
predominate, the lack of superiority provides an alternative ground to deny class
certification.” (/bid.) Generally, “a class action is proper where it provides small
claimants with a method of obtaining redress and when numerous parties suffer injury of
insufficient size to warrant individual action.” (/d. at pp. 120-121, internal quotation
marks omitted.)
Here, there are an estimated 89 members of the proposed class. It would be
inefficient for the Court to hear and decide the same issues separately and repeatedly for
each class member. Further, it would be cost prohibitive for each class member to file
suit individually, as each member would have the potential for little to no monetary
recovery. It is clear that a class action provides substantial benefits to both the litigants
and the Court in this case.
VIL. Notice
The content of a class notice is subject to court approval. (Cal. Rules of Court,
tule 3.769(f).) “The notice must contain an explanation of the proposed settlement and
procedures for class members to follow in filing written objections to it and in arranging
to appear at the settlement hearing and state any objections to the proposed settlement.”
(/bid.) In determining the manner of the notice, the court must consider: “(1) The
interests of the class; (2) The type of relief requested; (3) The stake of the individual class
members; (4) The cost of notifying class members; (5) The resources of the parties;
(6) The possible prejudice to class members who do not receive notice; and (7) The res
judicata effect on class members.” (Cal. Rules of Court, rule 3.766(e).)
Here, the notice describes the lawsuit, explains the settlement, and instructs class
members that they may opt out of the settlement or object. The gross settlement amount
and estimated deductions are provided, along with the estimated payment to each class
member. Class members are given 45 days to request exclusion from the class, submit a
written objection, or dispute their work week information. Class members are instructed
that they may appear at the final approval hearing to make an oral objection even if they
do not submit a written objection. The form of notice is generally adequate and is
approved, with the modification that class members’ estimated payments and work week
information shall be displayed in bold within a box set off from the rest of the text on the
first page of the notice.
With regard to appearances at the final fairness hearing, the notice shall be further
modified to instruct class members as follows:
Due to the COVID-19 pandemic, hearings before the judge overseeing this
case are currently being conducted remotely with the assistance of a third-
party service provider, CourtCall. If that remains the case at the time of
the final fairness hearing, class members who wish to appear at the final
fairness hearing should contact class counsel to arrange a telephonic
appearance through CourtCall, at least three days before the hearing if
possible. Any CourtCall fees for an appearance by an objecting class
member shall be paid by class counsel.
Turning to the notice procedure, the parties have selected Phoenix Settlement
Administrators as the settlement administrator. The administrator will mail the notice
packet within 15 days of preliminary approval, after updating class members’ addresses
using the National Change of Address Database. Any notice packets returned as
undeliverable will be re-mailed to any forwarding address provided or more recent
address located through a skip trace or by calling the class member’s mobile telephone.
Class members who receive a re-mailed notice will have an additional 20 days to
respond. These notice procedures are appropriate are approved.
VIIL._ Conclusion and Order
Prior to the hearing on this matter if possible, plaintiffs counsel shall file a
supplemental declaration addressing the maximum value of the claims in this action,
including the penalty claims. The supplemental declaration shall also address the
reference in the last subsection of the release to meal period claims, as well as the
termination of the class period as to Sales Development Representatives on July 31,
2018.
If preliminary approval is granted, the final approval hearing shall take place
on December 4, 2020 at 9:00 a.m. in Dept. 1. The following class will be preliminarily
certified for settlement purposes:
all persons who are employed or have been employed as exempt by Sage Intacct,
Inc. in the State of California as a:
e Sales Development Representative from September 12, 2014 through July
31, 2018; and/or
Corporate Account Manager from September 12, 2014 through July 15,
2020 or the date the Court grants preliminary approval, whichever date is
earlier.
Prior to final approval, plaintiff shall lodge for the Court’s review any individual
settlement agreement he may have executed in connection with his employment with
defendant.
The Court will prepare the order.
COVID-19 LAW AND MOTION HEARING PROCEDURES
Pursuant to the Judicial Council’s Emergency Rule 3(a)(1) and (3), all law and
motion hearings will be conducted telephonically through CourtCall until further notice.
Please see the General Order re: COVID-19 Emergency Order Regarding Complex Civil
Actions, and in particular sections 7 and 10, available at http://www.scscourt.org/
general_info/news_media/newspdfs/GENERALORDER_RECOVID-19_
EMERGENCY_ORDER_REGARDING_COMPLEXCIVILACTION.pdf. Ifa party
gives notice that a tentative ruling will be contested, any party seeking to participate in
the hearing should contact CourtCall.
Public access to telephonic hearings is available on a listen-only line by calling
888-808-6929 (access code 2752612).
State and local rules prohibit recording of court proceedings without a court order.
These rules apply while in court and also while participating in a telephonic hearing or
listening in on a public access line. No court order has been issued which would allow
recording of any portion of this motion calendar.
The court does not provide court reporters for proceedings in the complex civil
litigation departments. Any party wishing to retain a court reporter to report a hearing
may do so in compliance with this Court’s July 24, 2017 Policy Regarding Privately
Retained Court Reporters. The court reporter will participate remotely and will not be
present in the courtroom.