Source: s3://data.kl3m.ai/documents/govinfo/USCOURTS/USCOURTS-casd-3_08-cv-00795/USCOURTS-casd-3_08-cv-00795-0/pdf.json

Nature of Suit Code: 710
Nature of Suit: Fair Labor Standards Act
Cause of Action: 29:201 Fair Labor Standards Act

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UNITED STATES DISTRICT COURT

SOUTHERN DISTRICT OF CALIFORNIA

DONNA LOUIE; VALERIE STRINGER;

MARK STEELE; DAN ROYSE; JULIE

TEAGUE; JERAHMEEL CAPISTRANO,

Plaintiff,

CASE NO. 08cv0795 IEG RBB

ORDER (1) PRELIMINARILY

CERTIFYING CLASS FOR

SETTLEMENT PURPOSES; (2)

PRELIMINARILY APPROVING

SETTLEMENT; (3) APPOINTING

CLASS COUNSEL; AND, (4)

APPROVING CLASS NOTICE

PROGRAM

vs.

KAISER FOUNDATION HEALTH PLAN,

INC.; DOES 1 THROUGH 10,

Defendant.

Presently before the Court is a joint motion by defendant Kaiser Foundation Health Plan

("Kaiser") and a class of Kaiser's former employees represented by plaintiffs Donna Louie, Valerie

Stringer, Mark Steele, Dan Royse, Julie Teague, and Jerahmeel Capistrano (collectively, "Plaintiffs")

seeking (1) preliminary certification for settlement purposes, (2) preliminary approval of the

settlement, (3) appointment of class counsel, and (4) approval of the class notice program.

BACKGROUND

I. Factual Background

Plaintiffs, and the putative class members, worked for Kaiser as Product Specialists, Business

Application Coordinators ("BACs"), and Site Support Specialists on the Kaiser Permanente

HealthConnect computer system. Kaiser installed the Health Connect system as part of a procedure

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called "GoLive," which ensured Kaiser facilities used a common software system. 

During GoLive, Kaiser intermittently deployed Plaintiffs to facilities in California. During

deployments, Plaintiffs frequently missed meal breaks, worked more than eight hours per day, and

worked more than forty hours per week. Often, Kaiser required the Plaintiffs to work five to six

workdays per week, extending up to thirteen hours per day. Kaiser also required Plaintiffs to

participate in "Technical Dress Rehearsals," which Kaiser scheduled during meal periods, early in the

morning, or late in the evening to minimize interference with hospital staff. This caused Plaintiffs'

workday to exceed eight hours, for which they did not receive overtime compensation.

Furthermore, Kaiser required plaintiffs employed as Site Support Specialists to periodically

remain "on-call" for seven consecutive days. During their on-call week, Kaiser required Plaintiffs to

remain available twenty-four hours per day and to respond to technical support calls within thirty

minutes. The Plaintiffs did not receive overtime compensation for the time spent "on-call."

Since October 4, 2003, Kaiser has not compensated Plaintiffs for overtime or missed breaks,

claiming Plaintiffs are exempt from overtime under state and federal law because they are “executive,

administrative, or professional” employees. Plaintiffs dispute this classification. In total, the proposed

class is comprised of 619 Product Specialists and BACs and 151 Site Support Specialists. The total

claim for withheld overtime and missed meal or rest breaks is approximately $6,016,568.39.

II. Procedural Background

Although the Plaintiffs filed this settlement agreement for approval in this case, it is actually

the settlement of three related class actions.

In May 2008, Donna Louie filed this action. (Doc. No. 1.) Kaiser allegedly misclassified a

class of Site Specialists as exempt from overtime under California and federal law. Plaintiffs initiated

similar suits on behalf of Product Specialists and BACs in California state court and in the Northern

District of California. Valerie Stringer v. Kaiser Permanente, et al., Case No. RG 07349734 (Cal.

October 4, 2007); Mark Steele, et al. v. Kaiser Found. Health Plan, Inc., Case No. 3:07-cv-05743

(N.D. Cal. November, 13 2007). In order to coordinate all lawsuits for the purposes of requesting

Court approval of the settlement, the parties agreed to dismiss the Stringer and Steele actions. Louie

then filed the First Amended Complaint, incorporating the Stringer and Steele plaintiffs. (Doc. No. 3.)

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Plaintiffs allege Kaiser violated state and federal law by failing to pay overtime wages and not

providing meal or rest breaks for the Product Specialists, Business Application Coordinators, or Site

Specialists. Plaintiffs allege Kaiser misclassified members of the putative class as exempt under

California Labor Code § 515.5 and industrial Welfare commission Wage Order 4-2001. Furthermore,

Plaintiffs allege Kaiser improperly classified class members as exempt under federal law. Fair Labor

Standards Act, 29 U.S.C. § 213 (2000); 29 C.F.R. 541. Both the federal and state laws exempt

employees who work in an "executive, administrative, or professional" capacity.

Plaintiffs now move for (1) certification of the settlement class, (2) preliminary approval of

the settlement, (3) appointment of class counsel, and (4) approval of the class notice program.

III. The Proposed Settlement

Counsel for the parties agreed to a settlement which includes all persons employed by Kaiser

as (a) Product Specialists; (b) Business Application Coordinators ("BAC"); and (c) Site Support

Specialists within the state of California during the period from October 4, 2003 through the date of

the preliminary approval of the Settlement. The parties submitted to mediation before Anthony A.

Piazza, a mediator of wage and hour class actions. (Decl. Blumenthal ¶5; Decl. Qualls.) As a result

of the daylong negotiation, the parties reached a settlement. Id.

Kaiser agrees to pay $5.4 million to discharge all claims in this action on a claims-made basis

("Gross Fund Value"), without a reversion to Kaiser except for payment of taxes. (Decl. Blumenthal

¶3.) Before the $5.4 million is distributed to class members, the Claim Administrator will first pay

Class Counsel's attorneys' fees and costs, incentive awards for the class representatives, PAGA

payments, cost of class notice, and claims administration, leaving a Net Fund Value.

Each participating Settlement Class Member will be entitled to a share of the Net Fund Value.

The class will be broken into two subclasses: BAC/Product Specialist Subclass and Site Support

Specialist Subclass. The BAC/Product Specialist Subclass shall be allocated 59.36% of the Net fund

value and the Support Specialist Subclass shall be allocated 40.74%. The Claims Administrator will

determine each class member’s share of the net fund by dividing the number of qualifying work weeks

attributable to the class member by the total weeks worked by all members of the subclass.

Kaiser will additionally pay any required employer payroll taxes owing on the portion of the

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Gross Fund Value allocated to the wages. The Settlement provides for a claims process requiring

Kaiser to pay each timely and validly submitted claim.

The settlement further provides for attorneys' fees totaling 25% of the Gross Fund Value

($1,350,000). Counsel will also recoup up to $100,000 for reasonable litigation costs.

Each class representative will receive an incentive award of $25,000 per named plaintiff in

addition to their individual claim to the Net Fund Value.

The settlement allocates $50,000 for costs of the Claim Administrator and $33,333.33 to pay

the PAGA Settlement. Kaiser will deposit $5.4 million in an interest-bearing account within 15 days

of the preliminary approval and payment to class members will begin 15 days after final approval.

The parties agreed to the designation of the following firms as class counsel for the settlement

class: Qualls & Workman; Sanford, Whittles & Heisler, LLP; Law Offices of Grant E. Morris;

Blumethal & Nordrehaug; and United Employees Law Group.

DISCUSSION

When evaluating a motion for preliminary approval of a settlement for a class action, the Court

must first, determine whether a class exists and second, assess whether the settlement is

"fundamentally fair, adequate, and reasonable." Stanton v. Boeing Company, 327 F.3d 938, 952 (9th

Cir. 2003). The Court addresses the class certification, then examines the settlement agreement, and

finally turns to the questions of class counsel and class notice.

I. Class Certification

The parties seek, under Federal Rule of Civil Procedure 23(b)(3), to certify a class they define

in the settlement agreement:

All persons who, at any time between October 4, 2003 and preliminary

approval of the settlement, worked for Kaiser Foundation Health Plan,

Inc. in California in connection with KP HealthConnect in the positions

of Product Specialist, Business Application Coordinator ("BAC") or

Site Support Specialist.

(Decl. of Norman B. Blumenthal, Exhibit A at 3.) The parties divide the class into two subclasses:

one subclass of BACs and Product Specialists and a second subclass of Site Support Specialists. 

A plaintiff seeking Rule 23(b)(3) certification must first satisfy the prerequisites of Rule 23(a).

If subsection (a) is satisfied, Plaintiffs must then fulfil the Rule 23(b)(3) requirements. The general

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requirements of Rule 23(a) as well as the more specific requirements of Rule 23(b)(3) are addressed

in turn.

A. Rule 23(a) Requirements 

Rule 23(a) establishes four prerequisites for class action litigation: (1) numerosity, (2)

commonality, (3) typicality, and (4) adequacy of representation. Fed. R. Civ. P. 23(a); see Stanton

v. Boeing Company, 327 F.3d 938, 953 (9th Cir. 2003). 

1. Numerosity

The numerosity prerequisite is met if "the class is so numerous that joinder of all members is

impracticable." Fed. R. Civ. P. 23(a)(1). There are 619 BAC/Product Specialists and 151 Site

Support Specialists involved in this litigation. They are far too numerous be joined as plaintiffs in this

lawsuit. The proposed class satisfies the numerosity requirement.

2. Commonality

The commonality requirement is met if "there are questions of law or fact common to the

class." Fed. R. Civ. P. 23(a)(2). The commonality requirement is construed "permissively." Hanlon

v. Chrysler Corp., 150 F.3d 1011, 1019 (9th Cir. 1998). All questions of law need not be common,

but rather "the existence of shared legal issues with divergent factual predicates is sufficient." Id. 

The Plaintiffs have satisfied the commonality requirement. Kaiser's alleged misclassification

of BAC/Product Specialists and Site Support Specialists as "exempt" is the basis for the claims of both

the named plaintiffs and the proposed class. This misclassification is uniform across the class and

satisfies the commonality requirement.

3. Typicality

Typicality requires the members of the class have the same or similar claims as the named

plaintiffs. Fed. R. Civ. P. 23(a)(3). However, it is "not necessary that all class members suffer the

same injury." Lozano v. AT&T Wireless Services, Inc., 504 F.3d 718, 734 (9th Cir. 2007). 

In the instant case, Plaintiffs satisfy the typicality requirement. The claims of both the named

plaintiffs and the members of the class arise from Kaiser's conduct, involve similar work performed

in connection with the HealthConnect computer systems, and originate from the same legal theories.

Furthermore, each subclass is represented by a plaintiff who is a member of the subclass.

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4. Adequate Representation 

This Circuit finds representation adequate if (1) the plaintiffs "do not have conflicts of interest

with the proposed class" and (2) "[p]laintiffs are represented by qualified and competent counsel."

Dukes v. Wal-Mart, Inc., 509 F.3d 1168, 1185 (9th Cir. 2007). The heart of this requirement is the

concern over settlement allocation decisions. Hanlon, 150 F.3d at 1020 .

In this case, there appears to be no allocation issue and counsel is qualified and competent.

The allocation is reasonable because the distribution is based on the salary of the positions and the

average number of hours worked. Class counsel has extensive experience in more than two hundred

class action matters, including many wage and hour class actions. (Decl. Blumenthal, ¶ 31; Decl.

Qualls, ¶ 13.) The Plaintiffs have satisfied the Rule 23(a) requirements.

B. Rule 23(b)(3) Requirements

Rule 23(b)(3) requires (1) finding common issues of law or fact predominate over individual

issues and (2) finding class action is the superior method to fairly and efficiently adjudicate the

controversy. These requirements can be labeled the "predominance" and "superiority" requirements.

1. Predominance

Federal regulations apply the exemption to employees "primarily engaged in duties which meet

the test of exemption." 29 C.F.R. 541.402. The issue is whether an individual inquiry is necessary

to determine whether each plaintiff was "primarily engaged" in any duty meeting an exemption.

Predominance requires more than proof of common issues of law or fact. The common

questions must "‘present a significant aspect of the case [that] can be resolved for all members of the

class in a single adjudication.'" Hanlon, 150 F.3d at 1022 (citation omitted).

In similar cases, common claims predominate when plaintiffs allege "(a) company-wide

policies governing how employees spend time, or (b) uniformity in work duties and experiences that

diminish the need for individualized inquiry." Vinole v. Countrywide Home Loans, Inc., 246 F.R.D.

637, 640 (S.D. Cal. 2007). For example, an individualized inquiry was unnecessary when plaintiffs

challenged a policy classifying all employees of a given title as exempt. Krzesniak v. Cendant Corp.,

2007 U.S. Dist. LEXIS 47518 (N.D. Cal. June 20, 2007). Similarly, common claims predominated

when a defendant's compensation and exemption policy was uniform among the class. In re Wells

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Fargo Home Mortg. Overtime Pay Litig., 2007 U.S. Dist. LEXIS 77525 (N.D. Cal. October 17, 2007).

Here, the Plaintiffs had uniformity in work duties and experiences that diminish the need for

an individualized inquiry. Members of the putative class had the same job titles, work duties, work

experiences, and Kaiser uniformly applied the exemption to members of the class. Therefore,

common questions predominate. 

2. Superiority Requirement

The Court must also determine "a class action is superior to other available methods for the

fair and efficient adjudication of the controversy." Fed. R. Civ. P. 23(b)(3). The method is superior

if "litigation of common issues will reduce litigation costs and promote greater efficiency." Valentino

v. Carter-Wallace, Inc., 97 F.3d 1227, 1234. 

Since all of the claims involve a relatively insubstantial amount of money, a class action is the

superior method of adjudication.

C. Conclusion

For the foregoing reasons, the Court GRANTS preliminary certification to the class for the

purposes of settlement.

II. The Settlement

A. Legal Standard

Federal Rule of Civil Procedure 23(e)(1) requires the Court to determine whether a settlement

is "fair, reasonable, and adequate." To make this determination, the Court considers certain factors:

"(1) the strength of the plaintiff's case and the risk, expense, complexity, and likely duration of further

litigation; (2) the risk of maintaining class action status throughout trial; (3) the amount offered in

settlement; (4) the extent of discovery completed, and the stage of the proceedings; (5) the experience

and views of counsel." Stanton, 327 F.3d at 959 (quoting Molski v. Gleich, 318 F.3d 937, 953 (9th

Cir. 2003). In addition, the settlement may not be the product of collusion among the negotiating

parties. In re Mego Financial Corp. Securities Litigation, 213 F.3d 454, 458 (9th Cir. 2000). 

B. Analysis

Since the reaction of class members cannot be evaluated until the hearing for final approval

of the settlement, the Court only addresses the other factors.

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1. The Strength of the Plaintiffs' Case and the Risk, Expense, Complexity, and Likely Duration

of Further Litigation

Plaintiffs found two primary weaknesses in their case. First, they were uncertain whether the

court would find the administrative exemption, as defined in two federal regulations, bars recovery.

Specifically, the exemption includes "system analysts and computer programmers" if their primary

duty includes planning or organizing "activities required to develop systems to solve complex . . .

problems of the employer or customer." 29 C.F.R. § 541.402. Furthermore, the exemption also

includes "computer network, internet and database administration.” 29 C.F.R. § 541.201(a)(b).

Additionally, Plaintiffs feared two federal decisions might persuade the Court to find Plaintiffs

exempt. In Bagwell v. Florida Broadband, the court found a network operation engineer exempt

because of his primary duty to develop, improve, and ensure the reliability of a network. 2005 WL

1962562 (S.D. Fla. 2005). In Koppinger v. American Interiors, Inc., the court found a plaintiff exempt

because of his responsibility to maintain the company's computers. 295 F. Supp. 2d 797 (N.D. Ohio

2003). 

Second, Plaintiffs worried the class would not be certified due to a predominance problem.

In Dunbar v. Albertson's, the California Court of Appeal affirmed a denial of certification, finding the

application of the executive exemption required an individual inquiry for each class member. 141 Cal.

App. 4th 1422, 1431-32 (2006). 

Based on these considerations and the issue with predominance already noted, this factor

weighs in favor of preliminarily approving the settlement.

2. The Amount Offered in Settlement

In Glass v. UBS Financial Services, the court recently approved a settlement of an action for

unpaid overtime wages constituting approximately 25 to 35% of the estimated actual loss. 2007 U.S.

Dist. LEXIS 8476 (N.D. Cal. January 27, 2007). 

Here, the claims against Kaiser totaled $6,016,568.39. The settlement payment of $5,400,000

constitutes 89.75% of the subject claims. Even after deducting PAGA payments, attorneys' fees and

costs, and class representative incentive awards the Net Fund Value is still $3,725,000 or 62% of full

recovery. This factor weighs toward finding the settlement is fair, reasonable, and adequate.

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3. The Extent of Discovery Completed and the Stage of the Proceedings

Class Counsel has not completed extensive formal discovery in this proceeding. However,

"[i]n the context of class action settlements, ‘formal discovery is not a necessary ticket to the

bargaining table' where the parties have sufficient information to make an informed decision about

settlement." Linney v. Cellular Alaska Partnership, 151 F.3d 1234, 1239 (9th Cir. 1998)(quoting In

re Chicken Antitrust Litig., 669 F.2d 223, 241 (5th Cir. 1982).

Class counsel has conducted extensive informal discovery and has sufficient information to

make an informed decision about settlement. Class counsel served interrogatories, inspection

demands, and notices of depositions to Kaiser. (Decl. Qualls, ¶¶ 3-8, 10.) Kaiser provided records

and data in response to Plaintiffs' discovery requests; including, data regarding periods of

employment, pay rates, work schedules, and work weeks. Id. Plaintiffs had sufficient time to examine

the records and submitted the records to a class action damage analysis expert for review. Class

counsels’ extensive investigation, discovery, and research weighs in favor of preliminary settlement

approval.

4. Experience and Views of Counsel

As previously noted, class counsel has extensive experience in over two hundred class action

matters, including many wage and hour class actions. (Decl. Blumenthal, ¶ 31; Decl. Qualls, ¶ 13.)

Counsel believes the settlement is fair and adequate, which weighs in favor of preliminary approval.

5. Collusion Between the Parties

The collusion inquiry addresses the possibility the agreement is the result of either overt

misconduct by the negotiators or improper incentives of certain class members at the expense of other

members of the class. Stanton, 327 F.3d at 960. Because there is no evidence of overt misconduct,

the Court’s inquiry focuses on the aspects of the settlement that lend themselves to self-interested

action. Id. The aspects of the settlement susceptible to self-interested misconduct are the distribution

between the two subclasses, the Class Representative incentive awards, and attorneys' fees.

The distribution between the two subclasses does not appear to be the result of collusion

between the parties. The class is divided into two subclasses with the Site Support Specialist subclass

receiving 40.74% of the settlement and the BAC/Product Specialist subclass receiving 59.26%. This

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distribution balances the larger number of workweeks allocable towards the BAC/Product Specialist

subclass with the greater amount of overtime worked by the members of the Site Support Specialists.

This reasonable balancing indicates an absence of collusion between the negotiating parties.

The $25,000 incentive award for each Class Representative also does not to appear to be the

result of collusion. The Court evaluates incentive awards using "relevant factors includ[ing] the

actions the plaintiff has taken to protect the interests of the class, the degree to which the class has

benefitted from those actions, ... [and] the amount of time and effort the plaintiff expended in

pursuing the litigation ...." Stanton, 327 F.3d 938, 977 (9th Cir. 2003) (quoting Cook v. Niedert, 142

F.3d 1004, 1016 (7th Cir. 1998). Furthermore, a recent Northern District of California approved a

$25,000 incentive award in a similar case. Glass, 2007 U.S. Dist. LEXIS 8476. In this case, Plaintiffs

have protected the interests of the class and exerted considerable time and effort by maintaining three

separate lawsuits, conducting extensive informal discovery, hiring experts to analyze discovered data,

and engaging in day-long settlement negotiations with a respected mediator. The class has benefitted

from these actions by receiving a settlement constituting almost ninety percent of the original claim.

For these reasons, the incentive award does not appear to be the result of collusion.

Finally, the attorneys' fees also do not appear to be the result of collusion. Plaintiffs may

simultaneously negotiate the merits and attorneys' fees. Stanton, 327 F.3d at 971. In wage and hour

cases "[t]wenty-five percent is considered a benchmark for attorneys' fees in common fund cases."

Hopson v. Hanesbrands Inc., 2008 WL 3385452 at *3. (N.D. Cal. 2008) (citing Hanlon, 150 F.3d at

1029). Given this benchmark, these fees seem reasonable and not the result of collusion.

C. Conclusion

For the foregoing reasons, the Court GRANTS preliminary approval of the settlement.

III. Appointing Class Counsel

Traditionally, the choice of counsel has been left to the parties, whether they sue in their

individual capacities or as class representatives. In re Cavanaugh, 306 F.3d 726, 734 (9th Cir. 2002).

Plaintiffs' counsel appear to be competent to represent the class in the instant case. All firms

involved have extensive experience in class action and wage and hours litigation. As a result, the

court GRANTS Plaintiffs’ motion to appoint the following firms as class counsel: Qualls &

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Workman; Sanford, Whittles & Heisler, LLP; Law Offices of Grant E. Morris; Blumethal &

Nordrehaug; and United Employees Law Group. See 15 U.S.C. § 78u-4(a)(3)(B)(v).

IV. Class Notice

The class notice must (1) be "reasonably calculated to apprise interested parties of the

pendency of the action and afford them an opportunity to present their objections" and (2) must satisfy

the content requirements of Rule 23(c)(2)(B). Mullane v. Central Hanover Bank & Trust Co., 339

U.S. 306, 314 (1950). Under Federal Rule of Civil Procedure 23(c)(2)(B), the notice must state: 

(i) the nature of the action; (ii) the definition of the class certified; (iii)

the class claims, issues or defenses; (iv) that a class member may enter

an appearance through an attorney if the member so desires; (v) that the

court will exclude from the class any member who requests exclusion;

(vi) the time and manner for requesting exclusion; and (vii) the binding

effect of a class judgment on members. 

Here, the proposed method of notice is reasonable. The Claims Administrator will mail

individual Notices to the members of the settlement class via first-class regular U.S. mail using the

most current mailing address information available from Kaiser's payroll records. Additionally, the

Claims Administrator will reasonably update any out-of-date records of which she is aware.

The content of the notice is also adequate. The notice includes all necessary information about

the litigation. Accordingly, the Court GRANTS approval of the proposed class notice.

CONCLUSION

The Court GRANTS the parties’ motion for (1) preliminary certification of the class for

settlement purposes; (2) preliminary approval of the settlement; (3) appointment of class counsel; and

(4) approval of class notice program.

IT IS SO ORDERED.

DATED: October 6, 2008

IRMA E. GONZALEZ, Chief Judge

United States District Court

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