Grady v. RCM Tech.

671 F.Supp.3d 1065

Barbara GRADY, individually and on behalf of all others similarly situated, Plaintiff, v. RCM TECHNOLOGIES, INC., Defendant.

CASE NO. 5:22-cv-00842 JLS-SHK

United States District Court, C.D. California

Signed May 2, 2023

Joshua G. Konecky, Nathan Bunnell Piller, Yuri Alexander Chornobil, Sarah McCracken, Schneider Wallace Cottrell Konecky LLP, Emeryville, CA, for Plaintiff.

Martha J. Keon, Littler Mendelson, Philadelphia, PA, Shannon R. Boyce, Littler Mendelson PC, Los Angeles, CA, for Defendant.

ORDER DENYING WITHOUT PREJUDICE PLAINTIFF'S MOTION FOR PRELIMINARY APPROVAL OF CLASS ACTION AND PAGA SETTLEMENT

JOSEPHINE L. STATON, UNITED STATES DISTRICT JUDGE

Before the Court is an unopposed Motion for Preliminary Approval of Class Action and Private Attorneys General Act ("PAGA") Settlement filed by Plaintiff Barbara Grady ("Grady"). (Mot., Doc. 28.) The Court finds this matter appropriate for decision without oral argument, and the hearing set for May 5, 2023, at 10:30 a.m. is VACATED. Fed. R. Civ. P. 78(b); C.D. Cal. R. 7-15. For the following reasons, the Court DENIES WITHOUT PREJUDICE Grady's Motion.

I. BACKGROUND

On February 7, 2022, Grady initiated this putative wage-and-hour class action by filing a complaint in San Bernardino County Superior Court. (See Notice of Removal ("NOR") ¶ 3, Doc. 1; Complaint, Doc. 1-1.) Grady alleges the following causes of action on her own behalf and on behalf of others similarly situated against Defendant RCM Technologies, Inc. ("RCM"): (1) unpaid overtime in violation of California Labor Code §§ 510, 1194 and 1198 and IWC Wage Order No. 5; (2) failure to provide meal periods in violation of California Labor Code §§ 226.7 and 512(a) and California Code of Regulations tit. 8, § 11040; (3) failure to provide rest breaks in violation of California Labor Code § 226.7 and California Code of Regulations tit. 8, § 11040; (4) failure to pay for all hours worked in violation of California Labor Code §§ 201, 202, 204 and 221-23; (5) failure to keep accurate payroll records in violation of California Labor Code §§ 1174 and 1174.5; (6) failure to furnish accurate wage statements in violation of California Labor Code § 226; (7) failure to timely pay all wages owed on separation under California Labor Code §§ 201-3; (8) unfair competition in violation of California Business & Professions Code §§ 17200, et seq.; and (9) enforcement of the California PAGA, California Labor Code §§ 2698, et seq. (See NOR ¶ 3; Complaint ¶¶ 36-109.) RCM answered the Complaint in Superior Court on May 7, 2022. (NOR ¶ 5; Answer, Doc. 1-2.) RCM then removed the action to this Court on May 19, 2022. (See generally NOR.)

On December 7, 2022, the parties engaged in mediation before Michael J. Loeb of Judicial Arbitration and Mediation Services, Inc. ("JAMS"). (Konecky Decl. ¶ 19, Doc. 18-1; Mot at 4.) Shortly thereafter, the parties reached an agreement to settle the case. (Konecky Decl. ¶ 20; Mot. at 4-5.) On December 16, 2022, the parties filed a stipulation to stay the case pending resolution of Plaintiff's motion for preliminary approval of the proposed class action and PAGA settlement (the "Settlement"). (Doc. 23.) On March 3, 2023, after the Court granted a request for additional time to finalize the terms of the Settlement and draft a motion for preliminary approval of the Settlement, Grady filed the instant Motion. (Konecky Decl. ¶ 21, Mot. at 5.)

The key terms of the Settlement are as follows. First, RCM has agreed to pay a total gross settlement amount of $1,600,000. (Settlement Agreement ¶¶ 15, 48, Doc. 28-2.) The gross settlement amount will be allocated as follows: (1) $200,000 will be allocated to the putative class's PAGA claims (id. ¶ 49); (2) up to one third of the gross settlement fund, or $533,333.33, will be allocated to attorneys' fees for class counsel (id. ¶ 4); (3) up to $15,000 will be allocated to compensate class counsel for litigation costs incurred in prosecuting this action (id.); (4) up to $15,000 will be allocated to Grady as a class representative service award (id. ¶ 8); (5) up to $31,050 will be allocated to the settlement administration costs (id. ¶ 57); (6) the remainder of the gross settlement amount—the "Net Settlement Amount"—will be distributed as payments to participating class members (id. ¶¶ 18, 56.e-f). No funds will revert to RCM. (Id. ¶ 48.)

Grady's counsel estimate that a net settlement amount of $805,616.67 will be distributed to participating class members. (Konecky Decl. ¶¶ 26, 41.) Each participating class member's individual share of the settlement fund will be proportional to the number of "Workweeks" that the class member worked for RCM during the "Class Period" and the "PAGA Period." (Settlement Agreement¶ 56.f-g.) The "Class Period" extends from October 8, 2017 to March 7, 2023, and the "PAGA Period extends from July 22, 2020 to March 7, 2023. (Id. ¶¶ 7, 23.) The Settlement defines the term "Workweek" as "any workweek in which the Class Member worked at least one shift." (Id. ¶ 35.) Grady's counsel opine that "this is an objective, reasonable distribution formula because the value of an individual's claim will tend to increase proportionally with his or her length of service." (Konecky Decl. ¶ 27.)

In exchange, Grady and her counsel have agreed to release all of the class claims and PAGA claims alleged in the Complaint and arising during the applicable class and PAGA periods. (Settlement Agreement ¶¶ 25, 27.) The settlement class whose claims would be released under the Settlement is comprised of all current and former nonexempt employees of RCM who work or worked for RCM as a traveling nurse or similar hourly position in California during the Class and PAGA Periods. (Id. ¶¶ 6, 20.)

Last, Grady has agreed to an additional release and waiver that is broader than the class members' release under the Settlement because it includes "all claims, whether known or unknown" that she might have against RCM. (Id. ¶ 55.) Under the Settlement, 33% of Grady's proposed service award is consideration for her general release and the remaining 67% is an award for assuming the risks associated with prosecuting this case. (Id. ¶ 8.)

Grady now asks the Court to grant preliminary approval of the proposed settlement. (See generally Mot.) Specifically, she asks the Court to: (1) grant preliminary approval of the Settlement; (2) certify the proposed Class; (3) appoint Grady as Class Representative and her attorneys as Class Counsel; (4) appoint ILYM Group, Inc. as the Settlement Administrator; (5) approve the proposed Class Notice for distribution to the Class members; and (6) schedule a hearing for final approval of the settlement. (See generally id.)

II. LEGAL STANDARD

Federal Rule of Civil Procedure 23(e) requires judicial review and approval of any class settlement. See Fed. R. Civ. P. 23(e) ("The claims, issues, or defenses of a certified class—or a class proposed to be certified for purposes of settlement—may be settled, voluntarily dismissed, or compromised only with the court's approval."). Preliminary approval and conditional certification are the first stage of the approval process. "To secure preliminary approval and condition[al] certification, the parties must provide sufficient information for the court to determine that it 'will likely be able to' grant final approval of the settlement under Rule 23(e)(2) and certify the class for a judgment on the settlement." Lusk v. Five Guys Enterprises LLC ("Lusk II"), 2021 WL 2210724, at *2 (E.D. Cal. June 1, 2021) (quoting Fed. R. Civ. P. 23(e)(1)(B)). A settlement may be approved only after the Court finds that it is "fair, reasonable, and adequate." Fed. R. Civ. P. 23(e)(2). And a class can only be certified if the Court is satisfied that it meets the prerequisites of Rule 23(a) and one of the three categories of Rule 23(b). See Fed. R. Civ. P. 23(a)-(b).

Under Ninth Circuit precedent, "a district court examining whether a proposed settlement comports with Rule 23(e)(2) is guided by the eight 'Churchill factors' ":

(1) the strength of the 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 of the proposed settlement.

Kim v. Allison, 8 F.4th 1170, 1178 (9th Cir. 2021) (quoting In re Bluetooth Headset Prod. Liab. Litig., 654 F.3d 935, 946 (9th Cir. 2011); Churchill Vill., L.L.C. v. Gen. Elec., 361 F.3d 566, 575 (9th Cir. 2004)); accord Cashon v. Encompass Health Rehab. Hosp. of Modesto, LLC, 2022 WL 95274, at *2 (E.D. Cal. Jan. 10, 2022).

When settlement happens before formal class certification, approval is contingent not only on a thorough assessment of the Churchill factors, but also the district court's finding that the settlement "is not the product of collusion among the negotiating parties." In re Bluetooth, 654 F.3d at 946-47 (quoting In re Mego Fin. Corp. Sec. Litig., 213 F.3d 454, 458 (9th Cir. 2000)); accord In re Linkedin User Priv. Litig., 309 F.R.D. 573, 586 (N.D. Cal. 2015).

Rule 23(e), which Congress and the Supreme Court amended in 2018, also sets forth "specific factors to consider in determining whether a settlement is 'fair, reasonable, and adequate.' " Briseño v. Henderson, 998 F.3d 1014, 1023 (9th Cir. 2021); see Fed. R. Civ. P. 23(e)(2). In considering whether "the relief provided for the class is adequate," district courts in the Ninth Circuit must consider, in addition to the Churchill factors:

(i) the costs, risks, and delay of trial and appeal;

(ii) the effectiveness of any proposed method of distributing relief to the class, including the method of processing class-member claims;

(iii) the terms of any proposed award of attorney's fees,

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