ORDER (1) DISCHARGING ORDER TO SHOW CAUSE RE DISMISSAL AND (2) APPROVING RENEWED MOTION FOR PRELIMINARY APPROVAL OF CLASS ACTION SETTLEMENT
SAUNDRA BROWN ARMSTRONG, District Judge.
Plaintiff Khanh Nielson ("Plaintiff") brings the instant putative wage and hour class action on behalf of herself and all other non-exempt employees of The Sports Authority ("Defendant"). From 2007 to March 2011, Plaintiff worked for Defendant, a sporting goods retailer, as a non-exempt employee. During that time period, she, along with other non-exempt retail employees, allegedly were subject to off-the-clock "mandatory security checks" of their personal belonging whenever they left the store—even while on a meal or rest break. She filed this putative class action, claiming that Defendant's policy and concomitant failure to compensate non-exempt employees violates the California Labor Code.
The Court previously denied Plaintiff's motion for preliminary approval due to her failure to adequately support her various requests. In response to the Court's concerns, the parties revised their settlement, and on June 7, 2013, filed a "Stipulated Ex Parte Application" for preliminary approval. Dkt. 32.
On July 8, 2013, the Court denied the ex parte application. Dkt. 35. The Court found that the ex parte application was an improper attempt to circumvent the law and motion cut-off, which had already lapsed. In addition, the Court expressed concern that there was no evidence that Plaintiff had been injured by Defendant's security policy, thereby raising questions as to whether she has standing. In view of these concerns, the Court issued an order to show cause ("OSC") directing the parties to demonstrate why the action should not be dismissed for lack of subject matter jurisdiction and/or for failure to comply with a Court order.
The parties have now timely responded to the OSC. Dkt. 36, 37. Having read and considered the papers filed in response to the OSC, as well as the documents initially filed with the parties' renewed motion for preliminary approval, the Court vacates the OSC and preliminarily approves the revised class settlement.
The parties are familiar with the facts of this case which are summarized only to the extent necessary for purposes of the instant matter.
On August 22, 2011, the law firm of Scott Cole & Associates ("SCA") filed the instant action in state court on behalf of Plaintiff, individually, and on behalf of "[a]ll persons who are and/or were employed as non-exempt employees by The Sports Authority, Inc. in one or more of its California retail stores between August 22, 2007 and the present." Compl. ¶ 20. The Complaint alleges state law causes of action for: (1) failure to provide meal and rest periods; (2) failure to pay wages (straight time, overtime, premium pay, and minimum wage); (3) failure to provide accurate itemized or properly formatted wage statements; (4) failure to pay wages upon termination or timely upon/after termination; (5) unfair business practices in violation of Cal. Business and Professions Code section 17200, et seq.; and (6) violation of the California Private Attorney General Act, Cal. Labor Code section 2699 et seq. The Complaint also seeks waiting time penalties under Labor Code section 203, pre-judgment interest, and attorneys' fees and costs. Defendant removed the action to this Court on September 22, 2011, on the basis of diversity jurisdiction, 28 U.S.C. § 1332(a), and the Class Action Fairness Act,
In July 2012, the parties mediated their dispute before attorney Mark Rudy and reached a tentative settlement. Thereafter, on August 31, 2012, Plaintiff filed a motion for preliminary approval, which sought preliminary approval for a $2.5 million settlement (with an unrestricted reversion to Defendant of any unclaimed net settlement funds), conditional certification of the settlement class under Rule 23(a) and (b)(3), the appointment of SCA as class counsel, the appointment of Plaintiff as the class representative, authorization for Plaintiff's counsel to solicit bids from prospective claims administrators and permission to disseminate notice to Class Members. Dkt. 24.
On November 27, 2012, the Court denied Plaintiff's motion for preliminary approval on several grounds.
On June 7, 2013, a month after the law and motion cut-off had lapsed, the parties submitted a 24-page document entitled, "Stipulated Ex Parte Application for Order: (1) Granting Preliminary Approval of Class Action Settlement; (2) Granting Conditional Certification of the Settlement Class; (3) Appointing Class Counsel, Class Representative and Claims Administrator; and (4) Approving First Amended Complaint, Class Notice, Claim Form, Request For Exclusion Form." Dkt. 32. In an effort to rectify the deficiencies of her first motion, Plaintiff modified certain of the settlement terms
The Court construed the parties' ex parte application as a renewed motion for preliminary approval and denied said motion on two grounds. First, the Court found that the parties' renewed motion was untimely because they neither sought nor obtained leave to extend the law and motion cut-off. Second, the Court concluded that there were serious concerns regarding whether Plaintiff had standing to maintain the action. Accordingly, the Court issued an OSC directing the parties to show cause why the instant action should or should not be dismissed for lack of standing, or alternatively, for violation of a Court order, pursuant to Federal Rule of Civil Procedure 41(b).
On July 15, 2013, and July 19, 2013, Plaintiff and Defendant, respectively, timely filed responses to the OSC. Both agree that Plaintiff was personally subjected to the security policy at issue and that she has standing to pursue the instant claims on behalf of herself and the class. They also contend that the failure to seek leave to file a renewed motion for preliminary approval was inadvertent. As such, both parties request that the Court discharge the OSC and preliminarily approve the revised class settlement.
A. ORDER TO SHOW CAUSE
The threshold question presented is whether the parties' responses to the OSC adequately address the Court's concerns regarding Plaintiff's Article III standing. They have. Constitutional standing is established by showing: (1) an injury in fact, which is a violation of a protected interest, that is both (a) concrete and particularized, and (b) actual or imminent; (2) a causal connection between the injury and the defendant's conduct; and (3) a likelihood that the injury will be redressed by a favorable decision.
In its OSC, the Court expressed concern that Plaintiff may not have suffered the same injury as the class, let alone any injury at all, as a result of Defendant's security policy. OSC at 7-9. That concern arose from the supporting declaration of Plaintiff, which was devoid of any allegation that she was personally subjected to the policy at issue. In her response to the OSC, Plaintiff acknowledges that her declaration lacked the requisite specificity and failed to expressly allege that she was subjected to and injured by Defendant's policy. Pl.'s Response at 9, Dkt. 36. She explains, however, that the omission of such information was due in large part to Defendant's insistence that Plaintiff avoid making any statements regarding its liability for such policy.
The second issue raised in the OSC pertained to the parties' apparent attempt to circumvent the law and motion deadline set in the Court's Order for Pretrial Preparation. OSC at 9-10. Plaintiff indicates that the parties submitted a renewed motion for preliminary approval in the form of a joint ex parte application, as opposed to a noticed motion, because "the parties understood (apparently mistakenly), that the motion cut-off did not apply to settlement efforts." Pl.'s Response at 4. According to Plaintiff, since a settlement may be reached at any point prior to judgment, "it seemed logical that a request for approval could be brought at any time."
The parties' explanation for filing an untimely, renewed motion for preliminary approval is unavailing. While it is true that a settlement requiring judicial approval may be reached after a law and motion cut-off, it does not logically follow that such deadline is inapplicable to motions to approve a settlement. As the Ninth Circuit has explained, "[a] scheduling order is not a frivolous piece of paper, idly entered, which can be cavalierly disregarded by counsel without peril."
The above notwithstanding, the "drastic" sanction of dismissal of the action under Rule 41(b) for failure to comply with a court order is not warranted in this instance.
B. PRELIMINARY APPROVAL
Federal Rule of Civil Procedure 23(e) requires the court to determine whether a proposed settlement is "`fundamentally fair, adequate, and reasonable.'"
To make a fairness determination, the district court must balance a number of factors, including: (1) the strength of plaintiff's case; (2) the risk, expense, complexity, and likely duration of further litigation; (3) the risk of maintaining class action status throughout the trial; (4) the amount offered in settlement; (5) the extent of discovery completed, and the stage of the proceedings; (6) the experience and views of counsel; (7) the presence of a governmental participant; and (8) the reaction of the class members to the proposed settlement.
Given that some of the aforementioned "fairness" factors cannot be fully assessed until the Court conducts the final approval hearing, "a full fairness analysis is unnecessary at this stage."
The factors set forth in
C. CONDITIONAL CLASS CERTIFICATION
Plaintiff seeks conditional certification of a settlement class under Rule 23(a) and (b)(3). A class action will only be certified if it meets the four prerequisites identified in Federal Rule of Civil Procedure 23(a) and additionally fits within one of the three subdivisions of Federal Rule of Civil Procedure 23(b).
1. Rule 23(a)
Rule 23(a)(1) requires that the class be "so numerous that joinder of all members is impracticable." Fed. R. Civ.P. 23(a)(1). The class also must be "ascertainable."
"Commonality focuses on the relationship of common facts and legal issues among class members."
The Court previously found that Plaintiff's showing of commonality was deficient because she had failed to present sufficient information regarding her job duties, thereby impeding a determination of whether issues of fact and law were common to the class. Dkt. 28 at 5. In her supplemental declaration, Plaintiff clarifies that her and the Class Members' job duties are not pertinent to the claims at issue, since all non-exempt employees were subject to the security inspection policy. With that clarification, the Court is now satisfied that Plaintiff has sufficiently met the requirements for commonality for purposes of conditional class certification.
Rule 23(a)(3) requires that "the claims or defenses of the representative parties be typical of the claims or defenses of the class." Fed. R. Civ. P. 23(a)(3). "The purpose of the typicality requirement is to assure that the interest of the named representative aligns with the interests of the class."
In her prior motion for preliminary approval, Plaintiff alleged, without elaboration, that "[t]ypicality is met here as the claims of the Settlement Class are based on the same legal and factual claims as that of the Plaintiff." Dkt. 28 at 6. The Court found Plaintiff's conclusory assertion insufficient to establish typicality. However, as discussed above, Plaintiff has now clarified that she and fellow Class Members were not properly compensated due to Defendant's policy of requiring them to undergo off-the-clock security inspections. This suffices for purposes of meeting the typicality requirement.
Finally, Rule 23(a)(4) permits certification of a class action only if "the representative parties will fairly and adequately protect the interests of the class." Fed. R. Civ. P. 23(a)(4). "To determine whether named plaintiffs will adequately represent a class, courts must resolve two questions: (1) do the named plaintiffs and their counsel have any conflicts of interest with other class members and (2) will the named plaintiffs and their counsel prosecute the action vigorously on behalf of the class?"
The Court previously found that it was unable to assess the aforementioned issues due to Plaintiff's failure to provide information regarding the nature of her job position. Dkt. 28 at 6. However, Plaintiff's clarification of the theory of her case adequately assuages the Court's concerns. As such, the Court finds that there is no indication that there is any conflict of interest between the class and Plaintiff and/or her counsel. In addition, the record shows that Plaintiff and her counsel have been vigorously litigating this case in furtherance of the interests of the class.
2. Rule 23(b)(3)
A class may be certified under Rule 23(b)(3) if the Court finds that: (1) "the questions of law or fact common to class members predominate over any questions affecting only individual members," and (2) "a class action is superior to other available methods for fairly and efficiently adjudicating the controversy." These requirements are called the "predominance" and "superiority" requirements.
In its prior order, the Court found that Plaintiff's vague references to company-wide policies were insufficient to satisfy the predominance and superiority requirements. Dkt. 28 at 7. Plaintiff has rectified this deficiency by supplying the Court with the details of Defendant's alleged policy of failing to compensate non-exempt employees for time spent having their bags inspected while on a meal or rest break. Claims based on this type of commonly-applied policy are generally sufficient for purposes of satisfying the requirements of Rule 23(b)(3).
In sum, the record is sufficient to support conditional certification of the class under Rule 23(a) and (b)(3).
D. CLASS NOTICE
Rule 23 provides that where a proposed settlement has been reached by the parties, the "court must direct notice in a reasonable manner to all class members who would be bound by the proposal." Fed. R. Civ. P. 23(e)(1).
In connection with the first motion for preliminary approval, the Court expressed concern that the parties' agreement only afforded Class Members thirty days to submit their claim forms. The parties have since revised the settlement agreement to provide for a sixty day claims period. This is sufficient to address the Court's concerns that the notice period is too short. However, the Class Notice should be modified to indicate that objections must be post-marked by the specified deadline, as opposed to being "filed with the Court" by a particular date. Dkt. 32-2 at 34. In addition, the notice also should state that any objector desiring to be heard at the fairness hearing must contemporaneously request permission to appear at the hearing, and that the objector will not be allowed to present any argument or comment at the fairness hearing unless he or she has timely objected to the settlement and accompanied said objection with a request to appear.
For the reasons stated above,
IT IS HEREBY ORDERED THAT the parties' renewed motion for preliminary approval is GRANTED, as follows:
1. Pursuant to Federal Rule of Civil Procedure 23(a) and (b)(3), the Court conditionally certifies, for settlement purposes only, a proposed Settlement Class defined as follows:
2. Plaintiff Khanh Nielson is appointed as class representative.
3. Scott Cole & Associates, APC, is appointed as Class Counsel.
4. Class Counsel is granted permission to obtain bids from various companies for the administration of this Settlement. Upon its selection of a company, Class Counsel shall forthwith file an administrative motion and proposed order to appoint said company as the Claims Administrator. The administrative motion shall identify the name of the proposed administrator, along with a brief summary of its qualifications. Said motion shall be filed within twenty-one (21) days of the date this Order is filed.
5. Within seven (7) days of the date this Order is filed, Plaintiff shall submit a revised Class Notice which addresses the Court's concerns, as set forth supra. The revised Class Notice shall be redlined and/or highlighted to clearly indicate the modifications to the original proposed Class Notice. In addition, Plaintiff shall accompany the revised notice with a proposed order approving the same.
6. The Court directs mailing of the Class Notice, Claim Form and Request for Exclusion Form (collectively referred to as the "Class Notice Package") by United States First Class Mail, in accordance with the Implementation Schedule set forth below. Plaintiff Class Members shall not be required to pay return postage on the Claim Form and the cost of such postage shall be included in the fees and costs of the Administrator. The Court finds that the deadlines selected in the Implementation Schedule meet the requirements of due process and provide the best notice practicable under the circumstances.
7. The Court orders the following Implementation Schedule for further proceedings: