Document ID: s3://data.kl3m.ai/documents/govinfo/USCOURTS/USCOURTS-caed-1_12-cv-01868/USCOURTS-caed-1_12-cv-01868-15/pdf.json

Parties Involved:
CVS Pharmacy, Inc.
Defendant
Leticia Ceja-Corona
Plaintiff

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UNITED STATES DISTRICT COURT

EASTERN DISTRICT OF CALIFORNIA

LETICIA CEJA-CORONA, et al.,

Plaintiffs,

v.

CVS PHARMACY, INC.,

Defendant.

Case No. 1:12-cv-01868-AWI-SAB

FINDINGS AND RECOMMENDATIONS 

RECOMMENDING THAT PLAINTIFFS’ 

MOTION FOR PRELIMINARY APPROVAL 

OF A CLASS ACTION SETTLEMENT BE 

DENIED

ECF NO. 48, 55

OBJECTIONS DUE WITHIN FOURTEEN 

DAYS

On July 30, 2014, Plaintiffs Leticia Ceja-Corona and Margarita Rubio Armenta, on 

behalf of themselves and others similarly situated (hereinafter collectively referred to as 

“Plaintiffs”), filed a motion for preliminary approval of a class action settlement. (ECF No. 48.) 

After an initial hearing on September 10, 2014, an amended motion was filed on October 22, 

2014. (ECF No. 55.) Plaintiffs’ motion is unopposed.

The motion referred to the undersigned magistrate judge for findings and 

recommendations pursuant to 28 U.S.C. § 636(b). The hearing on Plaintiffs’ amended motion 

took place on October 29, 2014. David Yeremian appeared in person on behalf of Plaintiffs. 

Michelle Taylor appeared telephonically on behalf of Defendants.

For the reasons set forth below, the Court recommends that the motion for preliminary 

approval be denied.

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I.

BACKGROUND

A. Allegations in the Operative Complaint

The operative complaint in this action is the Second Amended Complaint filed on 

February 26, 2014. (ECF No. 45.) Plaintiffs’ complaint raises six causes of action: 1) for failure 

to pay minimum wages and overtime, 2) for failure to provide reporting time pay, 3) for failing 

to provide accurate earnings statements, 4) for failure to timely pay wages upon termination, 5) 

for unfair competition under California Business & Professions Code § 17200, and 6) for failure 

to pay wages and overtime for off-the-clock work, and 7) for penalties under California’s Private 

Attorney’s General Act, California Labor Code § 2699.

Plaintiffs Leticia Ceja-Corona and Margarita Rubio Armenta were employed by 

Defendant CVS Pharmacy, Inc. (“Defendant”) in the County of Stanislaus in California. 

(Second Am. Compl. ¶ 2.) Plaintiffs originally brought this action on behalf of two classes: first, 

on behalf of all persons who are or have been employed by Defendant at distribution centers as 

nonexempt hourly employees in the State of California at any time four years prior to the filing 

of this lawsuit and continuing on to the present. (Second Am. Compl. ¶ 27.) The second class 

consists of all persons who are or have been employed by Defendant at distribution centers as 

nonexempt hourly employees at any time three (3) years prior to the filing of this lawsuit and 

continuing to the present and who elect to opt into this action. (Second Am. Compl. ¶ 27.)

Plaintiffs allege that Defendant failed to pay Plaintiffs all wages, overtime, and reporting 

time pay due under the California Labor Code, the applicable California Industrial Welfare 

Commission Wage Orders, and the Fair Labor Standards Act. (Second Am. Compl. ¶ 10.) 

Plaintiffs allege that, prior to clocking in for the day, they must gain admittance into distribution 

centers using security badges that are swiped before passing through turnstiles. (Second Am. 

Compl. ¶ 14.) After entering the facility, employees must deposit their personal belongings in 

lockers because Defendant’s policy prohibits employees from taking personal belongings into 

areas where merchandise is stored. (Second Am. Compl. ¶ 15.) While at their lockers, 

employees must also collect the tools they use to perform their job duties. (Second Am. Compl. 

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¶ 15.) Employees then walk to the stock room, which requires employees to swipe their security 

badges. (Second Am. Compl. ¶ 16.) Frequently, there is a line of employees entering the stock 

room. (Second Am. Compl. ¶ 16.) Employees do not clock in until they are inside the stock 

room, and spend 15-20 minutes going through the entry process before they clock in. (Second 

Am. Compl. ¶ 16.) Employees must repeat the same process any time they leave the distribution 

center for a lunch or rest break. (Second Am. Compl. ¶ 16.) Employees are not compensated for 

this time. (Second Am. Compl. ¶ 16.)

Any time an employee leaves the distribution center, they must return to their lockers, 

return their tools and collect their personal belongings before going through the security 

screenings required by Defendant. (Second Am. Compl. ¶ 17.) During the security screenings, 

employees are searched. (Second Am. Compl. ¶ 18.) Often, employees must wait in long lines 

while other employees are searched as they leave. (Second Am. Compl. ¶ 18.) Employees spend 

15-20 minutes after clocking out to go through the security screening and are not compensated 

for their time. (Second Am. Compl. ¶ 20.)

Plaintiffs allege that the off-the-clock work described above causes employees to work 

overtime, either extending their shifts more than eight hours per day or over forty hours per 

week. (Second Am. Compl. ¶ 21.) Plaintiffs further allege that, in some instances, employees 

reported to work, but were given no work to do or worked less than one half of their scheduled 

shift, but did not receive reporting time pay. (Second Am. Compl. ¶ 22.) Plaintiffs further allege 

that employees were not given timely, accurate and itemized wage statements. (Second Am. 

Compl. ¶ 23.) Plaintiffs also allege that employees who quit their jobs with Defendant were not 

given all wages owed to them within 72 hours of resignation or thirty days thereafter. (Second 

Am. Compl. ¶ 24.)

B. Terms of the Proposed Class Settlement

Under the terms of the proposed settlement, Defendant agrees to pay $900,000.00 in cash 

to resolve the claims of any class members who do not timely and validly opt out. The 

$900,000.00 is paid by Defendant on a non-reversionary basis. The parties propose the 

following deductions from the $900,000.00 settlement figure:

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 up to $10,000 to Ceja-Corona and $7,500 for Armenta for their services and participation 

as class representatives;

 up to $270,000 to Class Counsel for attorneys’ fees and up to $15,000 for litigation costs;

 $7,500 to the California Labor and Workforce Development Agency (“LWDA”) for 

penalties pursuant to Labor Code § 2699, et seq.; and

 $30,700 for the costs of claims administration.

The parties seek to approve two classes for purposes of settlement. The first class, the 

“California Claims Class,” is defined as:

All persons who are or have been employed by CVS at distribution 

centers as nonexempt, hourly employees in the State of California 

at any time from October 9, 2008 through the Court’s preliminary 

approval of this Settlement or July 7, 2014, whichever occurs first.

Since July 7, 2014 has already passed, the Court presumes that the July 7, 2014 cut-off date 

applies for class members.

The second class, the “PAGA Claims Class,” is defined as:

All persons who are or have been employed by CVS at distribution 

centers as nonexempt, hourly employees in the State of California 

at any time from February 26, 2013 through the Court’s 

preliminary approval of this Settlement, or July 7, 2014, whichever 

occurs first.

The parties report that the California Claims Class consists of 2,270 people and the PAGA 

Claims Class consists of 1,759 people.

The proposed settlement provides that a formula will be applied to distribute the 

settlement funds to each participating class member based upon the number of wages the 

member worked during the relevant time period. The wages earned by an individual member 

during the relevant time period will be divided by the aggregated total wages of all members 

during the relevant time period to determine the percentage of the settlement pool that the 

individual member will receive. Any remaining funds in the settlement pool will be transferred 

to a charity, the CVS Health Employee Relief Fund.

/ / /

/ / /

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The parties propose the following timeline for settlement:

Timing Event

20 calendar days after preliminary approval 

of settlement

Defendant provides Claims Administrator 

mailing addresses for Class Members

30 calendar days after preliminary approval 

of settlement

Claims Administrator mails Notice Packet to 

Class Members

45 calendar days after Claims Administrator 

mails to Class Members

Deadline for Class Members to submit Claim 

Forms, exclusion forms, or objections.

28 days before final approval hearing Plaintiff files Motion for Final Approval of 

Class Action Settlement

February 18, 2014 Final Approval Hearing

II.

LEGAL STANDARDS FOR APPROVAL OF CLASS SETTLEMENTS

Federal Rule of Civil Procedure 23(e) states:

(e) Settlement, Voluntary Dismissal, or Compromise. The 

claims, issues or defenses of a certified class may be settled, 

voluntarily dismissed, or compromised only with the court’s 

approval. The following procedures apply to a proposed 

settlement, voluntary dismissal, or compromise:

(1) The court must direct notice in a reasonable manner to all 

class members who would be bound by the proposal.

(2) If the proposal would bind class members, the court may 

approve it only after a hearing and on finding that it is fair, 

reasonable, and adequate.

(3) The parties seeking approval must file a statement 

identifying any agreement made in connection with the proposal.

(4) If the class action was previously certified under Rule 

23(b)(3), the court may refuse to approve a settlement unless it 

affords a new opportunity to request exclusion to individual class 

members who had an earlier opportunity to request exclusion but 

did not do so.

(5) Any class member may object to the proposal if it requires 

court approval under this subdivision (e); the objection may be 

withdrawn only with the court’s approval.

Rule 23 “requires the district court to determine whether a proposed settlement is 

fundamentally fair, adequate, and reasonable.” Hanlon v. Chrysler Corp., 150 F.3d 1011, 1026 

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(9th Cir. 1998) (citing Class Plaintiffs v. City of Seattle, 955 F.2d 1268, 1276 (9th Cir. 1992)). 

“It is the settlement taken as a whole, rather than the individual component parts, that must be 

examined for overall fairness.” Id. (citing Officers for Justice v. Civil Serv. Comm’n of San 

Francisco, 688 F.2d 615, 628 (9th Cir. 1982)).

“Assessing a settlement proposal requires the district court to balance a number of 

factors: the strength of the plaintiffs’ case; the risk, expense, complexity, and likely duration of 

further litigation; the risk of maintaining class action status throughout the 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.” Hanlon, 150 F.3d at 1026 (citing Torrisi v. 

Tucson Elec. Power Co., 8 F.3d 1370, 1375 (9th Cir. 1993)). “To survive appellate review, the 

district court must show it has explored comprehensively all factors.” Id.

Moreover:

Several circuits have held that settlement approval that takes place 

prior to formal class certification requires a higher standard of 

fairness. The dangers of collusion between class counsel and the 

defendant, as well as the need for additional protections when the 

settlement is not negotiated by a court designated class 

representative, weigh in favor of a more probing inquiry than may 

normally be required under Rule 23(e).... Because settlement class 

actions present unique due process concerns for absent class 

members, we agree with our sister circuits and adopt this standard 

as our own.

Hanlon, 150 F.3d at 1026.

III.

DISCUSSION

A. California Class versus Nationwide Class

As an initial matter, the Court notes that the operative complaint in this action sought to 

certify a Nationwide Class for claims under the Fair Labor Standards Act. However, the 

amended motion for preliminary approval indicates that the present settlement does not seek 

relief for claims brought on behalf of the Nationwide Class and would not preclude Nationwide 

Class members (who are not members of the California Claims Class or the PAGA Claims 

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Class) from bringing those claims in a separate action. The settlement in this action effectively 

dismisses without prejudice the claims brought in the operative complaint on behalf of 

Nationwide Class members who are not members of the California Claims Class or the PAGA 

Claims Class.

B. Class Certification

When the parties seek approval of a proposed class action settlement, the Court must 

“ascertain whether the proposed settlement class satisfies the requirements of Rule 23(a) of the 

Federal Rules of Civil Procedure applicable to all class actions, namely: (1) numerosity, (2) 

commonality, (3) typicality, and (4) adequacy of representation.” Hanlon, 150 F.3d at 1019 

(citing Amchem Products, Inc. v. Windsor, 521 U.S. 591, 613 (1997)). Courts “must pay 

‘undiluted, even heightened, attention’ to class certification requirements in a settlement 

context.” Id. (quoting Amchem Products, Inc., 521 U.S. at 620).

Additionally, Plaintiffs seek certification of a class under Federal Rule of Civil Procedure 

23(b)(3), which requires a demonstration that questions of law or fact common to class members 

predominate over any questions affecting only individual members and that a class action is 

superior to other available methods for fairly and efficiently adjudicating the controversy.

Finally, the Court notes:

Rule 23 does not set forth a mere pleading standard. A party 

seeking class certification must affirmatively demonstrate his 

compliance with the Rule—that is, he must be prepared to prove 

that there are in fact sufficient numerous parties, common 

questions of law or fact, etc. We recognized in Falcon that 

“sometimes it may be necessary for the court to probe behind the 

pleadings before coming to rest on the certification question,” 

[citation] and that certification is proper only if “the trial court is 

satisfied, after a rigorous analysis, that the prerequisites of Rule 

23(a) have been satisfied, [citation].”

Wal-Mart Stores, Inc. v. Dukes, 131 S. Ct. 2541, 2551 (2011) (italics in original). In other 

words, Plaintiffs’ must prove, with supporting evidence, that the class certification requirements 

are met in this action.

/ / /

/ / /

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1. Numerosity

The numerosity requirement is satisfied where “the class is so numerous that joinder of 

all members is impracticable.” Fed. R. Civ. P. 23(a)(1). Plaintiffs’ motion for preliminary 

approval establishes that there are 2,270 members in the California Claims Class and 1,759 

members in the PAGA Claims Class. The Court finds that these classes are sufficiently 

numerous.

2. Commonality

The commonality requirement is satisfied where “there are questions of law or fact that 

are common to the class.” Fed. R. Civ. P. 23(a)(2). However, “[a]ll questions of fact and law 

need not be common to satisfy the rule. The existence of shared legal issues with divergent 

factual predicates is sufficient, as is a common core of salient facts coupled with disparate legal 

remedies within the class.” Hanlon, 150 F.3d at 1019.

“Commonality requires the plaintiff to demonstrate that the class members ‘have suffered 

the same injury.’” Wal-Mart Stores, Inc. v. Dukes, 131 S. Ct. 2541, 2551 (2011) (quoting 

General Telephone Co. of Southwest v. Falcon, 457 U.S. 147, 157 (1982)). “This does not mean 

merely that they have all suffered a violation of the same provision of law.” Id. “Their claims 

must depend upon a common contention.... That common contention, moreover, must be of such 

a nature that it is capable of class-wide resolution—which means that determination of its truth 

or falsity will resolve an issue that is central to the validity of each of the claims in one stroke.” 

Id. 

The Court finds that commonality exists with respect to some of the claims asserted by 

Plaintiffs. Specifically, commonality exists with respect to the claims based upon Defendant’s 

security check policy and unpaid wages for off-the-clock time spent going through security 

checks. The amended motion states that class members are employed at two distributions in 

California, one in the city of Patterson and the other in La Habra. Employees at both distribution 

centers are subjected to the same security policy which provides for random inspections of 

employees to ensure that employees are not stealing inventory. Employees at both distribution 

centers are required to go through a security check where guards check purses, bags, and lunch 

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bags for stolen inventory. Plaintiff contends that this policy raises a common contention among 

all class members regarding whether class members should have been compensated for their time 

undergoing these security checks.

However, the parties concede that Plaintiffs’ reporting time claims do not meet the 

commonality requirement. Plaintiffs’ complaint raised a claim based upon the contention that 

class members were sent home early from their scheduled shifts without compensation owed 

under the California Labor Code and the applicable Industrial Wage Commission Wage Order. 

However, the parties admit that no common contention existed because it was “nearly impossible 

to identify the days where this practice took place” and “not every Class Member was sent home 

early or volunteered to go.” (Am. Mem. of P. & A. in Supp. of Mot. for Order for Prelim. 

Approv. of Class Action Settlement 18:1-6.) Further, the parties admit that the reporting time 

claims are both legally and factually unrelated to the claims based upon the security check 

policy. The fact that some employees were sent home early was unrelated to the fact that 

employees spent off-the-clock time going through security checks.

At the hearing, the parties informed the Court that the settlement reached in this action is 

contingent upon the release of the reporting time claims on a class-wide basis. However, the 

inclusion of the reporting time claims destroys the existence of commonality among the class 

members and their claims. While commonality may exist among the class if the only claims 

being resolved were limited to those related to the off-the-clock time spent in security checks, the 

parties’ attempt to bootstrap the reporting time claims means there is no longer a single 

contention that will resolve an issue central to each of the claims in one stroke. Accordingly, 

class certification is inappropriate with respect to a class that includes claims relating to reporting 

time in this action. For this reason, class certification is inappropriate and the motion for 

preliminary approval should be denied.

3. Typicality

Rule 23(a)(3) requires that “the claims or defenses of the representative parties are typical 

of the claims or defenses of the class[.]” This does not require the claims to be substantially 

identical, but that the representatives claims be “reasonably co-extensive with those of the absent 

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class members.” Hanlon, 150 F.3d at 1020.

The amended motion demonstrates that the claims of Plaintiffs Leticia Ceja-Corona and 

Margarita Rubio Armenta are typical to the claims of the class. Both named plaintiffs worked at 

the Patterson Distribution Center, was subjected to security checks, and was not compensated for 

her time spent going through security checks.

4. Adequacy of Representation

The named plaintiffs must fairly and adequately protect the interests of the class. Fed. R. 

Civ. P. 23(a)(4). In determining whether the named plaintiffs will adequately represent the class, 

the 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?” Hanlon, 150 F.3d at 1020. “Adequate 

representation depends on, among other factors, an absence of antagonism between 

representatives and absentees, and a sharing of interest between representatives and absentees. 

Ellis v. Costco Wholesale Corp., 657 F.3d 970, 985 (9th Cir. 2011) (citations omitted).

At the stage, the Court is satisfied with Plaintiffs’ demonstration that they will adequately 

represent the class.

5. Predominance

“[T]he focus of the Rule 23(b)(3) predominance inquiry is on the balance between 

individual and common issues.” Alberto v. GMRI, Inc., 252 F.R.D. 652, 663 (E.D. Cal. 2008). 

Where common questions present a significant aspect of the case and are able to be resolved for 

all class members in a single action, the case can be handled on a representative rather than

individual basis. Alberto, 252 F.R.D. at 663. 

For the same reasons discussed above, in the context of the issue of commonality, the 

Court finds that Plaintiffs have adequately demonstrated predominance with respect to the claims 

related to off-the-clock time spent going through security checks, but have not demonstrated 

predominance with respect to the reporting time claims. See discussion, supra, Part III.B.2.

/ / /

/ / /

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6. Superiority

Rule 23(b)(3) provides that courts should consider “(A) the class members' interests in 

individually controlling the prosecution or defense of separate actions; (B) the extent and nature 

of any litigation concerning the controversy already begun by or against class members; (C) the 

desirability or undesirability of concentrating the litigation of the claims in the particular forum; 

and (D) the likely difficulties in managing a class action.” Where the parties have agreed to precertification settlement (D) and perhaps (C) are irrelevant. Amchem, 521 U.S. at 620. 

Plaintiffs note that resolving each class members’ claims on an individual basis would be 

uneconomical because each individual suit would be for a relatively small amount. Given the 

small value for each individual claim, class members would have little interest in individually 

controlling the prosecution or defense of separate actions. At this stage, the Court is unaware of 

any other litigation underway concerning the conduct at issue. Accordingly, the Court finds that 

a class action is superior to other means of resolution, at least with respect to the claims related 

to off-the-clock time spent in security checks.

C. Whether the Proposed Settlement is Fundamentally Fair, Adequate, and 

Reasonable

Plaintiffs must demonstrate that the proposed settlement is fundamentally fair, adequate, 

and reasonable. Hanlon, 150 F.3d at 1026 (citing Class Plaintiffs v. City of Seattle, 955 F.2d 

1268, 1276 (9th Cir. 1992)). “Assessing a settlement proposal requires the district court to 

balance a number of factors: the strength of the plaintiffs’ case; the risk, expense, complexity, 

and likely duration of further litigation; the risk of maintaining class action status throughout the 

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.” Hanlon, 150 F.3d at 1026 

(citing Torrisi v. Tucson Elec. Power Co., 8 F.3d 1370, 1375 (9th Cir. 1993)).

While the Court is generally satisfied with the parties’ analysis regarding the strength of 

Plaintiffs’ case, the risk, expense, complexity, and likely duration of further litigation, the risk of 

maintaining class action status, etc., there are a few discrete factors regarding the terms of the 

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settlement that the Court finds fundamentally unfair or unreasonable.

1. Release of the Reporting Time Claims Would Be Fundamentally Unfair to

Individual Class Members Who Possess Valid Reporting Time Claims

The Court notes that, under the terms of the proposed settlement, the reporting time 

claims of individual class members are being settled on a class-wide basis despite the fact that 

the parties acknowledge that such claims are not amenable to class treatment because they lack 

commonality. Plaintiffs admit that these claims have little value to the class as a whole. 

However, at the hearing, the parties informed the Court that the settlement in this action was 

contingent upon the settlement of the reporting time claims. Thus, the reporting time claims 

have some value. Plaintiffs’ admission that the reporting time claims have little value to the 

class underscores the fundamental unfairness of any settlement that resolves these reporting time 

claims on a class-wide basis.

The release of the reporting time claims has some significant value to Defendant, since 

the parties informed the Court that settlement is contingent upon the release of the reporting time 

claims. The reporting time claims may have little value from the perspective of the class as a 

whole because they are not amenable to class treatment, but they have some value to Defendant 

and some value to the individual class members who may possess valid reporting time claims. It 

would be fundamentally unfair to resolve these claims on a class-wide basis if these claims bring 

little value to the class as a whole, but deprive certain individual class members of reporting time 

claims that may have some value on an individual basis. In other words, settlement of the 

reporting time claims requires a select subset of individuals to release their reporting time claims 

despite bringing little value to the class as a whole.

Moreover, the inclusion of the reporting time claims in a settlement would only serve to 

cause confusion, since they are so unrelated to the claims regarding the off-the-clock time spent 

at security checks. Class members receiving notice of the settlement may not realize that they 

are giving up their rights to any reporting time claims if they assume that this action is solely 

related to the security check claims. Notably, the proposed notice of class action settlement 

contributes to this confusion, as it makes no mention of reporting time claims in the section titled 

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“Nature of the Lawsuit.”1

Even if the class notice were amended to include additional language regarding the 

reporting time claims, the Court finds that it would still cause confusion. The main crux of the 

class claims in this action is based upon the off-the-clock time spent in security checks. The 

reporting time claims are factually and legally unrelated. Class members receiving notice would 

likely be confused as to why they would be giving up their right to bringing reporting time 

claims in an action that is predominantly concerned with off-the-clock time spent in security 

checks.

The Court finds that the release of the reporting time claims is fatal to the parties’

settlement. The parties’ attempt to settle these claims is potentially collusive in nature. 

Defendant benefits from the release of the reporting time claims because it resolves a large 

number of claims among a large number of individuals in one stroke. Plaintiffs’ counsel and 

class members who do not possess reporting time claims would benefit from the release of the 

reporting time claims because it provided Defendant with an incentive to settle, which translated 

into a larger settlement number for the class and for the percentage reserved for attorneys’ fees. 

However, individual class members who possess reporting time claims are unduly burdened by 

releasing these claims for the benefit of Defendant, Plaintiffs’ counsel, and other class members 

who are not releasing reporting time claims. Accordingly, the settlement terms are 

 

1 The proposed notice states:

III. Nature of the Lawsuit

In this case, Plaintiffs sued CVS for damages for nonpayment of wages, including overtime 

premiums, for hours worked off the clock primarily while passing through security checks and for 

interest and penalties resulting from these violations. Plaintiffs additionally sued CVS for civil 

penalties for various violations of the California Labor Code, as permitted by the Private 

Attorneys General Act of 2004, Lab. Code § 2699 et seq. (“PAGA”). CVS denied and continues to 

deny all of the allegations made by Plaintiffs.

Plaintiffs and CVS tentatively settled this law suit. The Settlement received preliminary approval 

of the Court, subject to notice being provided to the members of the Classes and final approval by 

the Court after a public hearing. This proposed Settlement is described in the next section of this 

notice.

If you are a member of either of the Certified Classes established by the court, you will receive 

such benefits, if any, as you may qualify for under the proposed Settlement. If the proposed 

Settlement is not approved, then the offer of settlement will be deemed withdrawn, and the case 

will proceed in Court as if no settlement agreement had ever been reached.

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fundamentally unfair and the Court will recommend that the motion for preliminary approval be 

denied.

2. The Parties Offer No Justification for the Apportionment of PAGA Penalties

The claims brought in this action include claims under California’s Private Attorneys 

Generals Act (“PAGA”). Civil penalties recovered under PAGA are distributed between the 

aggrieved employees (25%) and the California Labor and Workforce Development Agency 

(“LWDA”) (75%). Cal. Labor Code § 2699(i). Any settlement of PAGA claims must be 

approved by the Court. Cal. Labor Code § 2699(l).

The terms of the settlement involves a $900,000 payment from Defendant. Of this 

$900,000 sum, the parties apportion only $10,000 toward the PAGA claims, resulting in a $7,500 

payment to the LWDA. The parties offer no reasoned basis for the calculation of this 

apportionment, other than that, in Plaintiffs’ counsel’s experience, the apportionment is in line 

with other settlements approved by other courts in PAGA matters.

In this case, Plaintiffs submitted a declaration wherein they provided the Court with 

Plaintiffs’ counsel’s opinion regarding the value of their claims, including the PAGA claims. 

Plaintiffs indicate that the “maximum value” of the underlying wage claims is $8,799,333, not 

including PAGA penalties. (Am. Decl. of David Yeremian in Supp. of Mot. for Order for 

Prelim. Approval of Class Action Settlement ¶ 14a.) Plaintiffs also estimated the maximum 

potential recovery under PAGA to be $7.5 million. (Id. at ¶ 14c.) Plaintiffs’ estimated the 

“realistic” potential recovery under PAGA would be $1-2 million.2 (Id.) 

Given the fact that the PAGA claims account for approximately 20% of the “maximum 

value” of the claims in this action, it does not seem reasonable that only 1% of the settlement is 

apportioned toward the PAGA claims. The arbitrary apportionment prejudices two sets of 

parties. First, the LWDA is arguably deprived of their fair share of the settlement proceeds. 

Second, members of the PAGA Claims Class are arguably deprived of their fair share of the 

 

2 While Plaintiffs provided a “realistic” recovery number to deflate number associated with PAGA penalties, it is 

unclear why the Court would compare the $1-2 million “realistic” figure to the $8,799,333 “maximum” figure 

associated with the wage claims. Comparing the two “maximum” figures yields a ratio between the value of the 

wage claims and the PAGA penalties closer to 50-50, as opposed to the smaller ratio between the “maximum” wage 

claim recovery versus the “realistic” PAGA claims recovery.

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settlement proceeds. If the PAGA claims account for 20% of the value of all the claims brought 

in this action, it would stand to reason that members of the California Claims Class who are not 

members of the PAGA Claims Class should receive a payment that is 20% less than the amount 

received by individuals who are members of both classes. Thus, the proposed settlement does 

not appear to fairly distribute settlement funds among the class members or the LWDA.

At the hearing, upon the Court’s inquiry, the parties considered settlement terms whereby 

the LWDA is given formal notice of the terms of the settlement, including the proposed 

apportionment of monetary damages between PAGA claims and non-PAGA claims, and an 

opportunity to object to the settlement. While this may remedy this particular defect in the 

settlement, the parties have not presented this proposal to the Court in response to its analysis 

and therefore the Court need not resolve this issue at this time.

3. Plaintiffs’ Counsel’s Request for 30% in Attorneys’ Fees

Plaintiffs’ counsel requests that 30% of the settlement proceeds be paid as attorneys’ fees. 

The Court ordered Plaintiffs’ to submit argument in the amended motion to preliminarily 

approve settlement addressing why the Court should depart from the “benchmark” reasonable fee 

of 25%. See In re Bluetooth Headset Products Liability Litigation, 654 F.3d 935, 942 (9th Cir. 

2011). The Court noted that settlement in this action was reached relatively early, prior to class 

certification. This case was filed in November 2012, meaning only approximately two years has 

passed since filing.

Plaintiffs’ submission does not identify any extraordinary circumstances justifying a 

departure from the 25% benchmark. Further, despite the fact that the Court previously informed 

Plaintiffs that it “will require Plaintiffs to submit evidence of the actual number of hours worked 

in this action to determine whether a departure from the benchmark of 25% is warranted,” (Order 

Req. Add’l Briefing on Pls.’ Mot. for Prelim. Approval of Class Settlement 15:4-6.) Plaintiffs 

did not submit evidence of the precise number of hours worked and instead only vaguely 

informed the Court that “several hundreds” of hours of work were performed by Plaintiffs’ 

attorneys. Even factoring the “several hundreds” of hours worked by Plaintiff, the Court finds 

Plaintiffs have not demonstrated that a departure from the 25% benchmark is warranted.

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For the foregoing reasons, the Court finds that the parties have failed to adequately 

demonstrate that the settlement reached in this action is fundamentally fair, and will recommend 

that the motion to preliminarily approve the settlement be denied.

IV.

CONCLUSION AND RECOMMENDATION

For the reasons set forth above, the Court finds that the proposed settlement is improper 

because class certification is inappropriate due to the inclusion of the reporting time claims and 

because the terms of the settlement are fundamentally unfair to certain class members and the 

LWDA.

Accordingly, it is HEREBY RECOMMENDED that the motion for preliminary approval 

of the class action settlement be DENIED.

These Findings and Recommendations are submitted to the United States District Judge 

assigned to this case, pursuant to the provisions of 28 U.S.C. § 636 (b)(1)(B) and Rule 304 of the 

Local Rules of Practice for the United States District Court, Eastern District of California. 

Within fourteen (14) days after being served with a copy, any party may file written objections 

with the court and serve a copy on all parties. Such a document should be captioned “Objections 

to Magistrate Judge’s Findings and Recommendation.” The Court will then review the 

Magistrate Judge’s ruling pursuant to 28 U.S.C. § 636 (b)(1)(C). The parties are advised that 

failure to file objections within the specified time may waive the right to appeal the District 

Court’s order. Martinez v. Ylst, 951 F.2d 1153 (9th Cir. 1991).

IT IS SO ORDERED.

Dated: October 30, 2014 

UNITED STATES MAGISTRATE JUDGE

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