Nielson v. TSA Stores Inc. et al
Filing
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ORDER by Judge ARMSTRONG denying 24 Motion for Settlement (lrc, COURT STAFF) (Filed on 11/27/2012)
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UNITED STATES DISTRICT COURT
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FOR THE NORTHERN DISTRICT OF CALIFORNIA
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OAKLAND DIVISION
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6 KHANH NIELSON, individually, and on
Case No: C 11-4724 SBA
behalf of all others similarly situated,
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Plaintiffs,
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ORDER DENYING PLAINTIFF’S
MOTION FOR PRELIMINARY
APPROVAL
vs.
Dkt. 24
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THE SPORTS AUTHORITY, and DOES 1
10 through 100, inclusive,
Defendants.
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The parties are presently before the Court on Plaintiff’s Motion for Order:
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(1) Granting Preliminary Approval of Class Action Settlement; (2) Granting Conditional
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Certification of the Settlement Class; (3) Appointing Class Counsel; (4) Appointing Class
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Representative; (5) Appointing Claims Administrator; and (6) Approving First Amended
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Complaint, Class Notice, Claim Form, Request For Exclusion Form and Timeline for
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Administration (“Motion for Preliminary Approval”). Dkt. 24. Having read and
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considered the papers filed in connection with the motion, and finding good cause
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therefrom, the Court DENIES Plaintiff’s motion. The Court, in its discretion, finds this
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matter suitable for resolution without oral argument. See Fed. R. Civ. P. 78(b); N.D. Cal.
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Civ. L.R. 7-1(b).
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I.
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BACKGROUND
On August 22, 2011, Plaintiff Khanh Nielson (“Plaintiff”) filed the instant wage and
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hour class action against The Sports Authority (“Defendant”) in San Francisco County
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Superior Court. Dkt. 1. The Complaint alleges causes of action for: (1) failure to provide
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meal and rest periods; (2) failure to pay wages (straight time, overtime, premium pay, and
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minimum wage); (3) failure to provide accurate itemized or properly formatted wage
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statements; (4) failure to pay wages upon termination or timely upon/after termination;
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(5) unfair business practices in violation of Cal. Business and Professions Code section
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17200, et seq; and (6) violation of the California Private Attorney General Act, Cal. Labor
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Code section 2699 et seq. The Complaint also seeks waiting time penalties under Labor
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Code section 203, pre-judgment interest, and attorneys’ fees and costs. Plaintiff purports to
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represent a class described as: “All persons who are and/or were employed as non-exempt
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employees by The Sports Authority, Inc. in one of more of its California retail stores
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between August 22, 2007 and the present.” Compl. ¶ 20. The Complaint, however, does
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not specify what job position Plaintiff held, what her job duties were, or whether she is a
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current or former employee. Id. ¶¶ 1, 4.
Defendant removed the action to this Court on September 22, 2011, on the basis of
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diversity jurisdiction, 28 U.S.C. § 1332(a), and the Class Action Fairness Act, id.
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§ 1332(d)(2). Dkt. 1. Following removal, Plaintiff served written discovery on
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Defendants, but the parties subsequently agreed to stay discovery pending meditation.
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Salassi Decl. ¶ 5, Dkt. 25. Instead, Plaintiff obtained data voluntarily produced by
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Defendant concerning the number of class members, hours worked, the number of shifts,
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pay rates and the average amount of hours worked per class member. Id. ¶ 15. On July 31,
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2012, the parties participated in a mediation session with attorney Mark Rudy, and reached
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a settlement in principle. Id. ¶¶ 6, 8. On August 31, 2012, the parties executed a written
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settlement agreement. Id. ¶ 9.
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Under the settlement, Defendant has agreed to pay a Gross Settlement Amount of
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$2,500,000. Salassi Decl. Ex. A ¶ 22, Dkt. 25-1. The Net Settlement Amount available to
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pay claims by class members consists of the Gross Settlement Amount less attorneys’ fees
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(based on 25% of the Gross Settlement Amount), litigation costs, an enhancement award of
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$2,500 to the Plaintiff and settlement administration expenses. Id. ¶¶ 52, 53, 56. The
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settlement provides for a reversion to Defendant of any unclaimed amounts from the Net
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Settlement Amount. Id. ¶ 57. Within five days of preliminary approval of the settlement,
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Defendant will provide the settlement administrator a database containing the contact
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information for the settlement class in order to facilitate notice to the class. Id. ¶ 62.
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Plaintiff proposes allowing class members thirty days to submit their claim form or opt out.
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Id. ¶ 65.
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Plaintiff has now filed a Motion for Preliminary Approval in which she seeks
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preliminary approval of the settlement, conditional certification of the settlement class, the
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appointment of class counsel, the appointment of Plaintiff Khanh Nielson as class
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representative and authorization for Plaintiff’s counsel to solicit bids from prospective
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claims administrators. Although Defendant has not filed any response to the motion, the
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Court, based on its independent review of the matter, finds that Plaintiff has failed to satisfy
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her burden of demonstrating that conditional certification of the settlement class under
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Federal Rule of Civil Procedure 23(a) and (b)(3) or preliminary approval of the settlement
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is appropriate. For that reason, the instant motion will be denied.
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II.
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DISCUSSION
The Ninth Circuit has declared that a strong judicial policy favors settlement of class
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actions. Class Plaintiffs v. City of Seattle, 955 F.2d 1268, 1276 (9th Cir. 1992).
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Nevertheless, where, as here, “parties reach a settlement agreement prior to class
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certification, courts must peruse the proposed compromise to ratify both [1] the propriety of
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the certification and [2] the fairness of the settlement.” Staton v. Boeing Co., 327 F.3d 938,
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952 (9th Cir. 2003).
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A.
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The district court has discretion to certify a class action under Rule 23. Meyer v.
CLASS CERTIFICATION
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Portfolio Recovery Assocs., LLC, 696 F.3d 943, 947 (9th Cir. 2012). To obtain class
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certification, the plaintiff must satisfy the four prerequisites identified in Rule 23(a) as well
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as one of the three subdivisions of Rule 23(b). Amchem Prods., Inc. v. Windsor, 521 U.S.
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591, 614 (1997). “The four requirements of Rule 23(a) are commonly referred to as
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‘numerosity,’ ‘commonality,’ ‘typicality,’ and ‘adequacy of representation’ (or just
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‘adequacy’), respectively.” United Steel, Paper & Forestry, Rubber, Mfg. Energy, Allied
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Indus. & Serv. Workers Int’l Union, AFL-CIO v. ConocoPhillips Co., 593 F.3d 802, 806
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(9th Cir. 2010). Certification under Rule 23(b)(3) is appropriate where common questions
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of law or fact predominate and class resolution is superior to other available methods. Fed.
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R. Civ. P. 23(b)(3). The party seeking class certification bears the burden of affirmatively
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demonstrating that the class meets the requirements of Rule 23. Wal-Mart Stores, Inc. v.
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Dukes, –– U.S. ––, 131 S.Ct. 2541, 2551 (2011).
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In general, “[b]efore certifying a class, the trial court must conduct a ‘rigorous
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analysis” to determine whether the party seeking certification has met the prerequisites of
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Rule 23.” Mazza v. Am. Honda Motor Co., Inc., 666 F.3d 581, 588 (9th Cir. 2012)
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(citation and quotations omitted). When evaluating class certification in the context of a
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proposed settlement, courts “must pay ‘undiluted, even heightened, attention’ to class
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certification requirements” because, unlike in a fully litigated class action suit, the court
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will not have future opportunities “to adjust the class, informed by the proceedings as they
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unfold.” Amchem Prods., 521 U.S. at 620; accord Hanlon v. Chrysler Corp., 150 F.3d
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1011, 1019 (9th Cir. 1998).
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1.
Rule 23(a)
a)
Numerosity
The numerosity requirement mandates that the class be “so numerous that joinder of
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all members is impracticable.” Fed. R. Civ.P. 23(a)(1). In addition, the class should be
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“ascertainable,” Mazur v. eBay Inc., 257 F.R.D. 563, 567 (N.D. Cal. 2009), meaning that
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the class definition must be “definite enough so that it is administratively feasible for the
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court to ascertain whether an individual is a member,” O’Connor v. Boeing N. Am., Inc.,
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184 F.R.D. 311, 319 (C.D. Cal. 1998). Here, Defendant’s records establish that there are
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9,518 class members who were classified as non-exempt employees during the class period.
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See Solassi Decl. ¶ 11. This is facially sufficient to satisfy Rule 23’s numerosity and
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ascertainability requirements. See Hanlon, 150 F.3d at 1019 (“The prerequisite of
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numerosity is discharged if ‘the class is so large that joinder of all members is
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impracticable.’”) (quoting in part Rule 23(a)(1)).
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b)
Commonality
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“Commonality focuses on the relationship of common facts and legal issues among
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class members.” Id. at 1021. This requirement is met through the existence of a “common
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contention” that is of “such a nature that it is capable of classwide resolution[.]” Dukes, 131
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S.Ct. at 2551. “What matters to class certification . . . is not the raising of common
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‘questions’—even in droves—but, rather the capacity of a classwide proceeding to generate
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common answers apt to drive the resolution of the litigation. Dissimilarities within the
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proposed class are what have the potential to impede the generation of commons answers.”
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Id.
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Plaintiff attempts to satisfy the commonality requirement by listing various legal
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issues—namely, the California statutes allegedly violated by Defendants—which she
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contends are common to the class. See Mot. at 9. However, Plaintiff makes no effort to
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identify her job position or duties relative to the class. The only common thread between
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them is that both were classified as non-exempt and worked at one or more of Defendant’s
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retail outlets in California. Since it is highly unlikely that all positions and job duties at
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Defendant’s retail stores are identical, the Court is not persuaded that there are no
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dissimilarities in the proposed class that could “impede the generation of common answers
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apt to drive the resolution of the litigation.” Dukes, 131 S.Ct. at 2551; e.g. Kelley v. SBC,
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Inc., No. C 97-2729 CW, 1998 WL 1794379, at *15 (N.D. Cal. 1998) (finding that
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commonality only existed as to class members who shared the job positions actually held
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by the plaintiff). Thus, Plaintiff has failed to establish commonality under Rule 23(a).
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c)
Typicality
The next requirement of Rule 23(a) is typicality, which focuses on the relationship
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of facts and issues between the class and its representative. “[R]epresentative claims are
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‘typical’ if they are reasonably co-extensive with those of absent class members; they need
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not be substantially identical.” Hanlon, 150 F.3d at 1020. “The test of typicality is whether
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other members have the same or similar injury, whether the action is based on conduct
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which is not unique to the named plaintiffs, and whether other class members have been
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injured by the same course of conduct.” Hanon v. Dataproducts Corp., 976 F.2d 497, 508
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(9th Cir. 1992) (citation and internal quotation marks omitted).
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Plaintiff contends that “[t]ypicality is met here as the claims of the Settlement Class
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are based on the same legal and factual claims as that of the Plaintiff.” Mot. at 10. Though
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Plaintiff fails to elaborate further on this conclusory assertion, the Court presumes that
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Plaintiff is alleging that she and the class suffered the same injury; that is, Defendant’s
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misclassification of employees and concomitant failure to pay overtime and provide meal
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and rest periods in violation of California law. Courts have found Plaintiff’s theory of
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typicality acceptable—but only as to the positions that the plaintiff actually held. See
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Campbell v. PriceWaterhouseCoopers, LLP, 253 F.R.D. 586, 603 (E.D. Cal. 2008); accord
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Kelley, 1998 WL 1794379, at *15. In this case, Plaintiff fails to specify what position or
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positions she held while employed by Defendant. Given the absence of this information,
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the Court finds that Plaintiff has failed to establish that her claims are typical of those of the
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class.
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d)
Adequacy of Representation
Members of a class may sue as representatives on behalf of the class only if they will
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fairly and adequately protect the interests of the class as a whole. Fed. R. Civ. P. 23.
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“Resolution of two questions determines legal adequacy: (1) do the named plaintiffs and
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their counsel have any conflicts of interest with other class members, and (2) will the
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named plaintiffs and their counsel prosecute the action vigorously on behalf of the class?”
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Hanlon, 150 F.3d at 1020. While there is nothing to indicate that Plaintiff or her counsel
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has any conflicts of interest with putative class members or that their interest in the case is
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insufficient to ensure vigorous representation, no specific information is provided about
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Plaintiff beyond her being a non-exempt employee who worked at one or more of
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Defendant’s retail stores. In the absence of such information, the Court cannot conclude, at
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this juncture, that Plaintiff is an adequate class representative.
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2.
Rule 23(b)(3)
Finally, Plaintiff has not sufficiently demonstrated that it would be appropriate to
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certify the settlement class under Rule 23(b)(3). This provision requires the Court to find
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that: (1) “the questions of law or fact common to class members predominate over any
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questions affecting only individual members,” and (2) “a class action is superior to other
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available methods for fairly and efficiently adjudicating the controversy.” Fed. R. Civ. P.
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23(b)(3). These provisions are referred to as the “predominance” and “superiority”
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requirements. See Hanlon, 150 F.3d at 1022-23.
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Plaintiff contends that the requirements of Rule 23(b)(3) are satisfied, ostensibly
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because Plaintiff and class members seek the same relief as a result of the same policy of
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misclassifying non-exempt employees. See Mot. at 11-12. But to secure certification
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under Rule 23(b)(3), Plaintiff must offer more than vague references to “company-wide
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common policies and procedures.” See Mot. at 11. “Whether such a policy is in place or
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not, courts must still ask where the individual employees actually spent their time.” In re
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Wells Fargo Home Mortg. Overtime Pay Litig., 571 F.3d 953, 959 (9th Cir. 2009). Since
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Plaintiff’s motion provides no such elucidation, the Court finds that Plaintiff has failed to
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satisfy the predominance and superiority requirements of Rule 23(b)(3).
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In sum, the Court concludes that Plaintiff has failed to demonstrate that class
certification under Rule 23(a) and (b)(3) is warranted in this action.
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B.
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Rule 23 requires judicial review of any settlement of the “claims, issues, or defenses
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of a certified class.” Fed. R. Civ. P. 23(e). The decision of whether to approve a proposed
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class action settlement entails a two-step process. See Manual for Complex Litig. § 21.632
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(4th ed. 2004). The Court first conducts a preliminary fairness evaluation. Id. If the Court
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preliminarily approves the settlement, notice to the class is then disseminated and a
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“fairness” or final approval hearing is scheduled. Id. The second step of the process
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culminates in a fairness hearing at which the proponent of the settlement must demonstrate
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that the settlement is “fair, reasonable, and adequate.” Id.; Fed. R. Civ. P. 23(e)(2). “The
FAIRNESS OF THE SETTLEMENT
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purpose of Rule 23(e) is to protect the unnamed members of the class from unjust or unfair
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settlements affecting their rights.” In re Syncor ERISA Litig., 516 F.3d 1095, 1100 (9th
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Cir. 2008) (citation omitted).
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“The initial decision to approve or reject a settlement proposal is committed to the
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sound discretion of the trial judge.” Officers for Justice v. Civil Serv. Comm’n of the City
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and County of San Francisco, 688 F.2d 615, 625 (9th Cir. 1982). Where, as here, a
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settlement has been reached prior to formal class certification, “a higher standard of
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fairness” applies due to “[t]he dangers of collusion between class counsel and the
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defendant, as well as the need for additional protections when the settlement is not
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negotiated by a court designated class representative[.]” Hanlon, 150 F.3d at 1026. In
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undertaking a fairness inquiry, the settlement must be “taken as a whole, rather than the
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individual component parts, that must be examined for overall fairness.” Id. The Court has
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no power to “delete, modify or substitute certain provisions”—and the settlement “must
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stand or fall in its entirety.” Id.
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To make a fairness determination, the district court must balance a number of
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factors, including: (1) the strength of plaintiff’s case; (2) the risk, expense, complexity, and
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likely duration of further litigation; (3) the risk of maintaining class action status
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throughout the trial; (4) the amount offered in settlement; (5) the extent of discovery
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completed, and the stage of the proceedings; (6) the experience and views of counsel;
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(7) the presence of a governmental participant; and (8) the reaction of the class members to
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the proposed settlement. See Molski v. Gleich, 318 F.3d 937, 953 (9th Cir. 2003). Given
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that some of these “fairness” factors cannot be fully assessed until the Court conducts the
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final approval hearing, “‘a full fairness analysis is unnecessary at this stage.’” See Alberto
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v. GMRI, Inc., 252 F.R.D. 652, 665 (E.D. Cal. 2008) (citation omitted). Rather,
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preliminary approval of a settlement and notice to the proposed class is appropriate: if
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“[1] the proposed settlement appears to be the product of serious, informed, noncollusive
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negotiations, [2] has no obvious deficiencies, [3] does not improperly grant preferential
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treatment to class representatives or segments of the class, and [4] falls with the range of
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possible approval . . . .” In re Tableware Antitrust Litig., 484 F. Supp. 2d 1078, 1079 (N.D.
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Cal. 2007) (citing Manual for Complex Litigation, § 30.44 (2d ed. 1985)).
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In the instant case, the settlement was reached as a result of mediation, which “tends
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to support the conclusion that the settlement process was not collusive.” Villegas v. J.P.
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Morgan Chase & Co., No. C 09-261 SBA, 2012 WL 3542187 at *5 (N.D. Cal. Aug. 14,
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2012). In addition, Plaintiff claims to have obtained some informal discovery prior to
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participating in the mediation. Salassi Decl. ¶ 15. However, Plaintiff fails to proffer
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sufficient information for the Court to determine whether the settlement falls within the
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range of possible approval. “To evaluate adequacy, courts primarily consider plaintiffs’
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expected recovery balanced against the value of the settlement offer.” In re Tableware
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Antitrust Litig., 484 F. Supp. 2d at 1080. Here, Plaintiff alleges that “Class Counsel
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evaluated the Settlement by weighing the maximum damages available to the class
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members for their overtime and statutory break claims against the relevant risk factors.”
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Salassi Decl. ¶ 20. However, Plaintiff does not specify the maximum recovery that
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Plaintiff could have obtained if the action were concluded on the merits. Without that
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information, the Court is unable to assess, at this juncture, whether the proposed settlement
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is reasonable. See Villegas, 2012 WL 3542187 at *5.
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The Court also has concerns regarding the parties’ agreement that class members
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only have thirty days to submit claims forms. A shorter claims period is likely to decrease
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the number of claims submitted. This undoubtedly benefits Defendant—particularly where,
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as here, the settlement provides that unclaimed settlement funds revert to Defendant.
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Salassi Decl. Ex. A at 14. Plaintiff’s concern, however, should be in protecting the interests
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of the class, not those of Defendant or the attorney fee award sought by her counsel, which
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will remain the same regardless of the number of class members submitting claim forms.
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Thus, should Plaintiff attempt to renew her motion for preliminary approval, she should
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ensure that class members are afforded at least sixty days to submit claim forms. C.f.
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Sanchez v. Sephora USA, Inc., No. C 11-03396 SBA, 2012 WL 2945753 at *6 (N.D. Cal.
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July 18, 2012) (noting that in Fair Labor Standard Act collective actions, courts generally
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provide sixty to ninety days to opt in).
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III.
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CONCLUSION
The Court concludes that Plaintiff has failed to demonstrate that conditional class
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certification under Rule 23(a) and (b)(3) or preliminary approval of the class settlement is
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warranted at this time. Accordingly,
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IT IS HEREBY ORDERED THAT Plaintiff’s Motion for Preliminary Approval is
DENIED.
IT IS SO ORDERED.
Dated: November 25, 2012
______________________________
SAUNDRA BROWN ARMSTRONG
United States District Judge
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