Superior Court, State of California



DATE: NOVEMBER 18, 2021 TIME: 1:30 P.M.

PREVAILING PARTY SHALL PREPARE THE ORDER

UNLESS OTHERWISE STATED (SEE RULE OF COURT 3.1312)

|LINE # |CASE # |CASE TITLE |RULING |

|LINE 1 |19CV352866 |Apple Inc. v. Gerard Williams, III (HEARING |To Be Issued Confidentially |

| | |WILL BE BY ZOOM) | |

|LINE 2 |20CV366981 |Capito v. San Jose Healthcare System LP |See tentative ruling. The Court will |

| | | |prepare the final order. |

|LINE 3 |18CV329690 |Wolther v. Maheshwari, et al. (Consolidated |See tentative ruling. The Court will |

| | |Action/LEAD CASE) |prepare the final order. |

|LINE 4 |19CV358066 |Robinson v. Inter-Con Security Systems, Inc. |See tentative ruling. The Court will |

| | |(JCCP #pending) |prepare the final order. |

|LINE 5 |2015-1-CV-284956 |Staats v. City of Palo Alto |See tentative ruling. The Court will |

| | | |prepare the final order. |

|LINE 6 |16CV301867 |Sinco Techs v Soon et al |See tentative ruling. The Court will |

| | | |prepare the final order. |

|LINE 7 |16CV301867 |Sinco Techs v Soon et al |See line 6. |

|LINE 8 | | | |

|LINE 9 | | | |

|LINE 10 | | | |

|LINE 11 | | | |

|LINE 12 | | | |

|LINE 13 | | | |

Calendar Line 1

Case Name: Apple Inc. v. Gerard Williams III, et al.

Case No.: 19CV352866

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Calendar Line 2

Case Name: Taylor Capito v. San Jose Healthcare System LP, et al.

Case No.: 20CV366981

This is a putative class action brought by Plaintiff Taylor Capito challenging the alleged nondisclosure of an Evaluation and Management Services Fee charged to emergency care patients by Defendant San Jose Healthcare System LP, dba Regional Medical Center of San Jose (“Regional”). In an order filed on September 17, 2021 (Order), the Court sustained without leave to amend Regional’s demurrer to the operative Second Amended Complaint. The Order followed the Court’s sua sponte notice that it would reconsider a prior order overruling Regional’s demurrer to the First Amended Complaint and directing the parties to provide supplemental briefing on certain issues.[1]

Plaintiff now moves for reconsideration of the Order, urging that Nede Mgmt. Inc. v. Aspen American Ins. Co. (2021) 68 Cal.App.5th 1121 (Nede) constitutes new law showing that her claim for declaratory relief should survive.

But far from announcing new law, Nede discusses “a line of cases holding that “ ‘[a] general demurrer is usually not an appropriate method for testing the merits of a declaratory relief action, because the plaintiff is entitled to a declaration of rights even if it is adverse to the plaintiff’s interest.’ ” (Nede, supra, 68 Cal.App.5th at p. 1130, internal citations omitted.) As Nede itself explains, “[t]his rule dates back at least to” 1944. (Ibid.) The subsequent authorities discussed by Nede also long predate this Court’s Order. More importantly, Nede and many of these authorities confirm that this rule “can often lead to a waste of court and litigant resources when it is clear the plaintiff seeks a declaration of rights to which he or she is not legally entitled. (Nede, supra, 68 Cal.App.5th at p. 1131.) “Hence, ‘where a complaint sets forth a good cause of action for declaratory relief regarding only a disputed question of law, declarations on the merits unfavorable to a plaintiff have been upheld although such determinations were made in the form of a judgment sustaining a demurrer.’ (Jefferson Incorporated v. City of Torrance (1968) 266 Cal.App.2d 300, 303 ….)” (Ibid.)

Here, another opinion published after the Court’s Order confirms that Plaintiff is not entitled to the declaration she seeks. In Gray v. Dignity Health (Oct. 13, 2021, No. A158648) ___Cal.App.5th___, 2021 Cal. App. LEXIS 850 (Gray), the Court of Appeal rejected the same claims on the same theory pursued by Plaintiff here. Notably, Gray affirmed the trial court’s order sustaining the defendant hospital’s demurrer to a claim for declaratory relief without leave to amend, explaining:

Gray’s claim for declaratory and injunctive relief has no independent vitality apart from his UCL and CLRA claims. Rather, it is a request for particular forms of equitable relief. (See Green Valley Landowners Assn. v. City of Vallejo (2015) 241 Cal.App.4th 425, 433, fn. 8….) Since his UCL and CLRA claims fail, so too does his request for declaratory and injunctive relief.

(Gray, supra, 2021 Cal. App. LEXIS 850, at *32.) The same is true here.

For these reasons, the Court DENIES Plaintiff’s motion for reconsideration.

The Court will prepare the order.

***

LAW AND MOTION HEARING PROCEDURES

The Court rescinded, effective June 21, 2021, all prior general orders restricting courthouse access.  Remote appearances for complex civil matters are still permitted, but are no longer mandatory.  (See General Order Rescinding Portion of May 6, 2020 General Order Concerning Complex Civil Actions, available at

RescindingPortionof050621GeneralOrderConcerningComplexCivilActions.pdf.)  If a party gives notice that a tentative ruling will be contested, any party seeking to participate in the hearing remotely should contact CourtCall.

Public access to hearings is available on a listen-only line by calling 888-808-6929 (access code 2752612).

State and local rules prohibit recording of court proceedings without a court order.  These rules apply while in court and also while participating in a hearing remotely or listening in on a public access line.  No court order has been issued which would allow recording of any portion of this motion calendar.

The court does not provide court reporters for proceedings in the complex civil litigation departments.  Any party wishing to retain a court reporter to report a hearing may do so in compliance with this Court’s October 13, 2020 Policy Regarding Privately Retained Court Reporters.  The court reporter may participate remotely and need not be present in the courtroom.  

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Calendar Line 3

Case Name: Matt Wolther v. Shubhan Maheshwari, et al.

Case No.: 18CV329690 (lead case)

Veeco Instruments acquired Ultratech in 2017. Former Ultratech shareholders sued Veeco and some of its directors and officers, claiming there were material misrepresentations and omissions in the registration statement and offering documents used in the acquisition.

Before the Court is Plaintiffs’ motion for preliminary approval of a class settlement, which is unopposed. As discussed below, the Court is inclined to grant preliminary approval, subject to the parties’ agreement to amend the release and a few modifications to the class notices.

I.   BACKGROUND  

A.   Factual  

Veeco designs and manufactures equipment used to make electronic devices, including light emitting diodes (“LEDs”), micro-electromechanical systems (“MEMS”), wireless devices, power electronics, hard disk drives, and semiconductor devices. (Consolidated Complaint, ¶ 7.) Its products are sold to semiconductor and advanced packaging device manufacturers. (Ibid.) Ultratech, for its part, sells lithography products for advanced packaging applications and LEDs, as well as semiconductor wafer inspection solutions. (Ibid.) Ultratech also sells its products to semiconductor manufacturers.

Given the synergies between the two companies, Veeco and Ultratech—both of whom were publicly-traded companies—decided to merge. On February 2, 2017, Veeco and Ultratech agreed that Veeco would acquire Ultratech as its wholly-owned subsidiary. (Consolidated Complaint, ¶ 32.) Under the merger agreement, Ultratech shareholders would receive, for each of their Ultratech shares, (i) $21.75 in cash, (ii) .2675 of a share of Veeco stock, and (iii) cash in lieu of fractional shares of Veeco common stock. (Id. ¶ 34.)

1. The Alleged Misrepresentations and Omissions

To convince Ultratech shareholders to vote in favor of the merger, and as required by law, Veeco and its officers and directors prepared, reviewed, and signed a registration statement that was filed with the Securities and Exchange Commission on March 13, 2017, as well as an amendment filed on April 21. (Consolidated Complaint, ¶ 36.) Veeco filed the prospectus for the merger on April 24. (The Consolidated Complaint refers to the registration statement, amendment, and the prospectus collectively as the “Registration Statement” or the “Offering Documents,” Consolidated Complaint, ¶ 1, fn. 1, and the Court will do so as well.)

Plaintiffs allege that the Offering Documents were false and misleading in many ways, and that these misrepresentations and omissions caused Ultratech shareholders to vote in favor of the merger, which was completed on May 26. (Id. ¶ 37.) Plaintiffs first allege that Offering Documents failed to disclose “that Veeco was experiencing delays in orders for its and Ultratech’s advanced packaging business and increased competition in China in Veeco’s MOCVD market, leading to pricing pressure, and that Veeco was already in dispute [sic] with its largest competitor in China, Advanced Micro-Fabrication Equipment Inc. (‘AMEC’), regarding intellectual property and patent infringement, and that these material problems … would adversely affect its rate of growth and financial results.” (Consolidated Complaint, ¶¶ 39, 57.) The Offering Documents also falsely (at least according to Plaintiffs) stated that no third party had infringed Veeco’s intellectual property, while failing to disclose “that AMEC was only able to gain market share and undercut Veeco’s prices by infringing Veeco’s intellectual property, … that AMEC, which was 25% owned by the Chinese government and thus had significant political and economic pull in China, intended to aggressively retaliate against Veeco in China in response to Veeco’s allegations of intellectual property infringement, and that these significant disputes were likely to continue to erode Veeco’s market share and margins in its key Chinese market.” (Id. ¶¶ 41-43.)

The Offering Documents touted that Veeco benefits from the regulatory environment in China, while omitting that AMEC was selling Veeco’s technology, which had been stolen by AMEC’s suppliers, and was insulated from this conduct due to its ownership by the Chinese government. (Id. ¶ 44.) According to Plaintiffs, the Offering Documents omitted that “due to the availability of similar technology in part [as] a result of the patent infringement, Veeco’s customers were pursuing dual supplier strategies that were decimating Veeco’s sales.” (Id. ¶ 46.) These facts allegedly were also omitted from Veeco’s SEC Form 8-K filings that included PowerPoint presentations touting the merger, and also from Veeco’s annual report, all of which were incorporated into the Registration Statement. (Id. at ¶¶ 49-55.)

2. The Events Surrounding the Merger

On April 12, 2017, after contentious private discussions broke down, Veeco filed a patent infringement complaint in the United States District Court for the Eastern District of New York against AMEC’s primary wafer carrier supplier, SGL Carbon, LLC and SGL Carbon SE (collectively, “SGL”), alleging that SGL was infringing Veeco’s patents by making and selling certain wafer carriers to AMEC. (Consolidated Complaint, ¶ 43.) Then, on July 13, AMEC filed a patent infringement complaint against Veeco Instruments Shanghai Co., Ltd. (“Veeco Shanghai”) with the Fujian High Court in China. (Id. ¶ 56.)

Plaintiffs allege that as Veeco began to reveal the omitted information to analysts and investors following the merger, its stock began to decline. (Consolidated Complaint, ¶¶ 62-73.) On December 7, 2017, Veeco issued a press release disclosing that the Fujian High Court had issued a ruling requiring Veeco Shanghai to stop importing, making, selling, and offering to sell certain products. (Id. ¶ 74.) By December 8, just over six months after the merger, Veeco’s stock had declined to $11.90 per share, 62.8 percent less than the merger price, at the same time that the Dow Jones Industrial Average gained 15.96 percent. (Id. ¶¶ 61, 75.) Veeco’s stock has never fully recovered and, as of the filing of the complaint in this case, traded at approximately $14 per share, which was approximately a 56 percent decline from the time of the merger. (Id. at ¶ 76.) By the time the Consolidated Complaint was filed, Veeco was trading at $7-8 per share. (Ibid.)

B.   Procedural 

 

In June 2018, Matt Wolther filed an action against Veeco and various officers and directors (collectively “Defendants”) in this Court, asserting putative class claims for violations of sections 11, 12(a)(2), and 15 of the Securities Act of 1933 (“Act”). Two related actions later were filed in August 2018: one by Iron Workers District Council of New England Pension Fund (“Iron Workers Pension Fund”) and one by Construction Workers Pension Trust Fund-Lake County and Vicinity (“Construction Workers Pension Trust Fund”). Upon motion, the Court (Judge Walsh) consolidated the three cases in November 2018.

In December 2018, Plaintiffs filed the Consolidated Complaint, alleging violations of sections 11, 12(a)(2), and 15 of the Act. Defendants demurred to each cause of action in the Consolidated Complaint, and the Court (Judge Walsh) overruled their demurrer in May 2019.

In August 2020, Plaintiffs moved to certify the class. The Court granted their motion on April 14, 2021, certifying a class of

all persons who acquired Veeco Instruments, Inc. common stock in exchange for Ultratech, Inc. common stock pursuant to the registration statement and prospectus issued in connection with Veeco’s May 26, 2017 merger with Ultratech.[2]

Notice has not yet issued to the class.

 The parties have now reached a settlement.  Plaintiffs move for an order preliminarily approving the settlement of the class claims, approving the form and method for providing notice to the class, and scheduling a final fairness hearing  

II.   LEGAL STANDARD  

 

Generally, “questions whether a [class action] settlement was fair and reasonable, whether notice to the class was adequate, whether certification of the class was proper, and whether the attorney fee award was proper are matters addressed to the trial court’s broad discretion.”  (Wershba v. Apple Computer, Inc. (2001) 91 Cal.App.4th 224, 234–235 (Wershba), disapproved of on other grounds by Hernandez v. Restoration Hardware, Inc. (2018) 4 Cal.5th 260.)   

   

In determining whether a class settlement is fair, adequate and reasonable, the trial court should consider relevant factors, such as the strength of plaintiffs’ case, the risk, expense, complexity and likely duration of further litigation, the risk of maintaining class action status through 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.    

 

(Wershba, supra, 91 Cal.App.4th at pp. 244–245, internal citations and quotations omitted.)

        

 In general, the most important factor is the strength of the plaintiffs’ case on the merits, balanced against the amount offered in settlement. (See Kullar v. Foot Locker Retail, Inc. (2008) 168 Cal.App.4th 116, 130 (Kullar).) But the trial court is free to engage in a balancing and weighing of factors depending on the circumstances of each case.  (Wershba, supra, 91 Cal.App.4th at p. 245.)  The trial court must examine the “proposed settlement agreement to the extent necessary to reach a reasoned judgment that the agreement is not the product of fraud or overreaching by, or collusion between, the negotiating parties, and that the settlement, taken as a whole, is fair, reasonable and adequate to all concerned.”  (Ibid., citation and internal quotation marks omitted.)

The burden is on the proponent of the settlement to show that it is fair and reasonable.  However “a presumption of fairness exists where: (1) the settlement is reached through arm’s-length bargaining; (2) investigation and discovery are sufficient to allow counsel and the court to act intelligently; (3) counsel is experienced in similar litigation; and (4) the percentage of objectors is small.”    

 

(Wershba, supra, 91 Cal.App.4th at p. 245, citation omitted.)  The presumption does not permit the Court to “give rubber-stamp approval” to a settlement; in all cases, it must “independently and objectively analyze the evidence and circumstances before it in order to determine whether the settlement is in the best interests of those whose claims will be extinguished,” based on a sufficiently developed factual record.  (Kullar, supra, 168 Cal.App.4th at p. 130.)

 

III.   SETTLEMENT PROCESS  

 

Following the resolution of Defendants’ demurrer, Veeco produced and Plaintiffs reviewed over 182,000 pages of documents. The parties met and conferred several times about discovery, including during an informal discovery conference with the Court. Plaintiffs have also analyzed public filings and other materials, and retained an expert to analyze the potential damages in the case.

  The parties engaged in settlement negotiations for more than a year. They participated in two full-day mediation sessions with the Honorable Jay C. Gandhi (Ret.), first on May 27, 2020 and then on June 23, 2021 after the Court granted class certification. In advance of the mediation sessions, the parties prepared detailed mediation statements, supported by evidence. Following the second session, the parties continued to negotiate with Judge Gandhi’s assistance. On July 7, they accepted a mediator’s proposal to resolve the action for $15 million.

IV. SETTLEMENT PROVISIONS

Pursuant to the settlement, Veeco’s insurance carrier(s) will deposit the gross settlement amount into an escrow account.  Attorney fees of up to $5 million (one-third of the gross settlement) and litigation costs not to exceed $175,000 will be deducted from the gross settlement. The named plaintiffs will also seek enhancement awards totaling up to $20,000.[3] Actual, reasonable administration costs not to exceed $500,000 will be paid from the gross settlement prior to final approval.

The net settlement, approximately $9.3 million by the Court’s calculation, will be distributed to eligible class members in accordance with the Plan of Allocation described in the class notice. Class members will have 90 days to submit a proof of claim supported by documentation, and will have an opportunity to remedy any curable deficiencies in their claims. Each claimant will be allocated a pro rata share of the net settlement based on his or her Recognized Claim compared to the total Recognized Claims of all accepted claimants, considering factors including the number of shares acquired, whether the shares were ever sold, and, if so, when they were sold and for what amounts. Only class members who had a net market loss during the relevant period will be eligible to receive a distribution from the net settlement fund, and claims will be limited to the amount of overall market loss. Claimants who would otherwise receive a distribution of less than $10 will not receive any distribution.

If there is any balance remaining in the net settlement fund six months after distribution, the administrator will reallocate it among authorized claimants if economically feasible. When reallocation is no longer reasonable, any remaining balance shall be donated to the Legal Aid Society of Santa Clara County.

In exchange for the settlement, class members will release all claims

that both (i) arise out of, are based upon, are connected to, or relate in any way to any of the allegations, acts, transactions, facts, events, matters, occurrences, statements, representations, misrepresentations or omissions involved, set forth, alleged or referred to, in this Action, or which could have been alleged in, referred to or made part of this Action, and (ii) arise out of, are based upon, are connected to, or relate in any way to the acquisition of Veeco common stock by Class Members pursuant or traceable to the Offering Documents issued in connection with Veeco’s May 26, 2017 Merger with Ultratech. … For the avoidance of doubt, “Released Claims” does not include any claims brought under the federal securities laws against Veeco that are unrelated to the allegations, acts, transactions, facts, events, matters, occurrences, statements, representations, misrepresentations, or omissions involved, set forth, alleged or referred to, in this Action, or which could have been alleged in, referred to or made part of this Action.

The release is inappropriately broad insofar as it includes claims “in any way” related to the facts alleged in the complaint. “[A] court cannot release claims that are outside the scope of the allegations of the complaint.” (Amaro v. Anaheim Arena Management, LLC (2021) 69 Cal.App.5th 521, 537; see also id. at pp. 537–538 [release of claims “reasonably related” to the allegations in the complaint would be appropriate, but release of claims “in any way relat[ed]” was not], italics original.) Prior to the hearing on this matter if possible, the parties shall meet and confer about whether they can amend the release to conform with Amaro. (See id. at pp. 539–539.)

V. FAIRNESS OF SETTLEMENT

Plaintiffs explain that key issues in the case were hotly disputed, including whether the Offering Documents adequately disclosed the issues complained of by Plaintiffs, loss causation, and how any damages should be calculated. These issues would require expert testimony to resolve, and raise a significant risk of no recovery.

Plaintiffs estimated the potential damages for their section 11 claim would total between $80 and $96 million, so that the settlement represents between 15.63 and 18.75 percent of the maximum value of this claim. (The section 12 and 15 claims would have similar damages.) The Court agrees that this is a good result for the class. Setting aside the issue with the release, the settlement warrants preliminary approval.

The Court retains an independent right and responsibility to review the requested attorney fees and award only so much as it determines to be reasonable. (See Garabedian v. Los Angeles Cellular Telephone Co. (2004) 118 Cal.App.4th 123, 127–128.) It is inclined to view an attorney fee award of one-third of the common fund as a bit high in a large securities settlement like this one.[4] Counsel must submit billing records and lodestar information prior to the final approval hearing in this matter so the Court can compare the lodestar information with the requested fees.  Plaintiffs must also describe and analyze the results of the claims process, so that the Court can determine how much of their losses participating class members will recover from the net settlement. The claims administrator must also submit a declaration detailing its actual expenses associated with administering the settlement.  

VI. NOTICE

The content of a class notice is subject to court approval.  (Cal. Rules of Court, rule 3.769(f).)  “The notice must contain an explanation of the proposed settlement and procedures for class members to follow in filing written objections to it and in arranging to appear at the settlement hearing and state any objections to the proposed settlement.” (Ibid.)  In determining the manner of the notice, the court must consider: “(1) The interests of the class; (2) The type of relief requested; (3) The stake of the individual class members; (4) The cost of notifying class members; (5) The resources of the parties; (6) The possible prejudice to class members who do not receive notice; and (7) The res judicata effect on class members.”  (Cal. Rules of Court, rule 3.766(e).)      

 

  Here, the notice describes the lawsuit and explains the settlement and Plan of Allocation. It instructs class members that they may opt out of the settlement or object, and must submit a proof of claim to receive a distribution. The gross settlement amount and estimated deductions are provided. Class members are instructed how to dispute the administrator’s determinations regarding their proofs of claim. They are given 60 days to request exclusion from the class or submit a written objection to the settlement. A summary notice provides a briefer overview and directs class members how to find the full notice.

The forms of notice are generally adequate. But the notice must be modified to state the estimated dollar value of the attorney fee award and administrative costs, and the summary notice must provide the estimated deductions from the gross settlement as well. The notices shall also be modified to instruct class members that they may appear at the final approval hearing to make an oral objection without submitting a written objection. The notice shall be further modified to instruct class members that they may request to be excluded from the class by simply providing their name, without the need to provide their address, phone number, or information about their Veeco shares. The notice must also be modified to remove discussion of an injunction issued by the Court, which has not occurred.

With regard to appearances at the final fairness hearing, the notice shall be further modified to instruct class members as follows:        

 

Hearings before the judge overseeing this case are again being conducted in person. However, remote appearances are still permitted, and are offered with the assistance of a third-party service provider, CourtCall.  If that remains the case at the time of the final fairness hearing, class members who wish to appear at the final fairness hearing remotely should contact class counsel to arrange an appearance through CourtCall, at least three days before the hearing if possible.  Any CourtCall fees for an appearance by an objecting class member shall be paid by class counsel.   

Turning to the notice procedure, the parties have selected Gilardi & Co. LLC as the settlement administrator. The administrator will mail the notice packet within 21 calendar days of preliminary approval. Notice will be mailed to all class members whose names and addresses can be identified from Veeco’s transfer records. In addition, the administrator will send out letters to entities which commonly hold securities in “street name” as nominees for the benefit of their customers, directing them to forward the notice to beneficial owners or provide such owners’ information to the claims administrator.

A proof of claim will be mailed with the notice and will also be made available online. The summary notice will be published in The Wall Street Journal and over a national newswire service within 31 calendar days of preliminary approval, and the administrator will establish a dedicated website and a toll-free telephone number where class members can obtain information about the settlement. These notice procedures are appropriate and are approved.

VII. CONCLUSION

   The Court is inclined to grant preliminary approval, subject to the parties’ agreement to amend the release to conform with Amaro and to the modifications to the class notices stated above. Assuming preliminary approval is granted at or soon after the scheduled hearing, the final approval hearing shall take place on July 14, 2022 at 1:30 p.m. in Dept. 1.  

Prior to final approval, Plaintiffs shall provide an accounting and analysis of the results of the claims process for the Court’s consideration. The claims administrator must also submit a declaration detailing its actual expenses associated with administering the settlement.

The Court will prepare the order.

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LAW AND MOTION HEARING PROCEDURES

The Court rescinded, effective June 21, 2021, all prior general orders restricting courthouse access.  Remote appearances for complex civil matters are still permitted, but are no longer mandatory.  (See General Order Rescinding Portion of May 6, 2020 General Order Concerning Complex Civil Actions, available at

RescindingPortionof050621GeneralOrderConcerningComplexCivilActions.pdf.)  If a party gives notice that a tentative ruling will be contested, any party seeking to participate in the hearing remotely should contact CourtCall.

Public access to hearings is available on a listen-only line by calling 888-808-6929 (access code 2752612).

State and local rules prohibit recording of court proceedings without a court order.  These rules apply while in court and also while participating in a hearing remotely or listening in on a public access line.  No court order has been issued which would allow recording of any portion of this motion calendar.

The court does not provide court reporters for proceedings in the complex civil litigation departments.  Any party wishing to retain a court reporter to report a hearing may do so in compliance with this Court’s October 13, 2020 Policy Regarding Privately Retained Court Reporters.  The court reporter may participate remotely and need not be present in the courtroom.  

The court does not provide court reporters for proceedings in the complex civil litigation departments.  Any party wishing to retain a court reporter to report a hearing may do so in compliance with this Court’s October 13, 2020 Policy Regarding Privately Retained Court Reporters.  The court reporter may participate remotely and need not be present in the courtroom.  

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Calendar Line 4

Case Name: Nicholas Robinson v. Inter-Con Security Systems, Inc., et al.

Case No.: 19CV358066

  This is an action under the Private Attorneys General Act (“PAGA”), alleging that Defendant Inter-Con Security Systems, Inc. failed to pay employees on a weekly basis and to reimburse them for business expenses as required by the Labor Code. Before the Court is Inter-Con’s motion for summary adjudication of Plaintiff’s weekly pay claim based on the “90-day exemption” established by Labor Code section 201.3,[5] subdivision (b)(6). Plaintiff opposes Defendant’s motion.

As discussed below, the Court GRANTS Inter-Con’s motion.

I. BACKGROUND

A. Factual

According to the operative complaint, Plaintiff was hired by Defendant to work as a security guard/officer in October 2018. (Complaint, ¶ 6.) He alleges that Defendant is a licensed private patrol operator and that he and other aggrieved employees are licensed security guards required to be paid on a weekly basis pursuant to Section 201.3. (Id., ¶ 16.) Plaintiff further alleges that he and other aggrieved employees were not assigned to work for any particular client for over 90 consecutive days, but were assigned to work for different clients at different locations on a regular basis. (Ibid.) In addition, although Plaintiff and other aggrieved employees were required to drive their own vehicles to different posts at Defendant’s sole discretion, they were not reimbursed for their mileage. (Ibid.) Plaintiff filed this action on November 6, 2019, asserting a single claim for PAGA penalties based on the two theories outlined above.

B. Procedural

In an order filed on November 6, 2020, the Court (Judge Walsh) overruled/denied Defendant’s motion for judgment on the pleadings and/or demurrer, which was based on the asserted collateral estoppel effect of the judgment in a related action, Singh v. Inter-Con Security Systems, Inc. (Super. Ct. Santa Clara County, 2019, No. 17CV313202) (Singh), and the pendency of another related case, Stewart v. Inter-Con Security System, Inc. (Super. Ct. LA. County, No. 19STCV31142) (Stewart).

Defendant filed the instant motion on July 12, 2021. On September 8, Defendant submitted a Petition for Coordination to the Chair of the Judicial Council, seeking to coordinate this matter with Stewart and several other related cases. The Court accordingly stayed proceedings in this case, but entered a stipulated order lifting the stay as to the pending motion only, and the matter was fully briefed.

On October 13, 2021, the Court issued a tentative ruling, which explained that because Inter-Con’s motion did not completely dispose of Mr. Robinson’s Section 201.3 claim, the Court could not hear it unless the parties agreed to an appropriate stipulation. (See Code Civ. Proc., § 437c, subds. (f)(1), (t).) The parties informed that Court that they would agree that the motion be heard, and the Court continued the matter accordingly. The parties lodged a stipulation on November 9, which defines the issue to be adjudicated as whether “Plaintiff’s Section 201.3 claim fails because Inter-Con intended to assign Plaintiff to the same client for over 90 consecutive calendar days.” The Court approved the stipulation, and the matter came on for hearing based on the original briefing.

II. LEGAL STANDARD

 

“A defendant seeking summary judgment must show that at least one element of the plaintiff’s cause of action cannot be established, or that there is a complete defense to the cause of action.  …  The burden then shifts to the plaintiff to show there is a triable issue of material fact on that issue.”  (Alex R. Thomas & Co. v. Mutual Service Casualty Ins. Co. (2002) 98 Cal.App.4th 66, 72; see also Code Civ. Proc., § 437c, subd. (p)(2).)      

 

  This standard provides for a shifting burden of production; that is, the burden to make a prima facie showing of evidence sufficient to support the position of the party in question.  (See Aguilar v. Atlantic Richfield Co. (2001) 25 Cal.4th 826, 850–851 (Aguilar).)  The burden of persuasion remains with the moving party and is shaped by the ultimate burden of proof at trial.  (Ibid.)  “There is a triable issue of material fact if, and only if, the evidence would allow a reasonable trier of fact to find the underlying fact in favor of the party opposing the motion in accordance with the applicable standard of proof.”  (Ibid.)  The opposing party must produce substantial responsive evidence that would support such a finding; evidence that gives rise to no more than speculation is insufficient.  (Sangster v. Paetkau (1998) 68 Cal.App.4th 151, 162–163.)                      

 

  The traditional method for a defendant to meet its burden on summary judgment is by “negat[ing] a necessary element of the plaintiff’s case” or establishing a defense with its own evidence.  (Guz v. Bechtel Nat’l, Inc. (2000) 24 Cal.4th 317, 334 (Guz).)  The defendant may also demonstrate that an essential element of plaintiff’s claim cannot be established by “present[ing] evidence that the plaintiff does not possess, and cannot reasonably obtain, needed evidence-as through admissions by the plaintiff following extensive discovery to the effect that he has discovered nothing.”  (Aguilar, supra, 25 Cal.4th at p. 855.)    

 

On summary judgment, “the moving party’s declarations must be strictly construed and the opposing party’s declaration liberally construed.”  (Hepp v. Lockheed-California Co. (1978) 86 Cal.App.3d 714, 717 (Hepp); see also Johnson v. American Standard, Inc. (2008) 43 Cal.4th 56, 64 [the evidence is viewed in the light most favorable to the opposing plaintiff; the court must “liberally construe plaintiff’s evidentiary submissions and strictly scrutinize defendant’s own evidence, in order to resolve any evidentiary doubts or ambiguities in plaintiff’s favor”].) Summary judgment may not be granted by the court based on inferences reasonably deducible from the papers submitted, if such inferences are contradicted by others which raise a triable issue of fact.  (Hepp, supra, 86 Cal.App.3d at pp. 717–718.)        

 

Even if there are some triable issues in the case, the court has the power to summarily adjudicate that one or more causes of action has no merit, there is no affirmative defense to one or more causes of action, there is no merit to a claim for punitive damages (Civil Code section 3294), or one or more defendants either owed or did not owe a duty to the plaintiff or plaintiffs.  (Code Civ. Proc., § 437c, subd. (f)(1).) Moreover, “a party may move for summary adjudication of a legal issue … that does not completely dispose of a cause of action, affirmative defense, or issue of duty” if the parties so stipulate pursuant to Code of Civil Procedure, section 437c, subdivision (t). Such a motion “shall proceed in all procedural respects as a motion for summary judgment.” (Id., subd. (t)(5).)

III. REQUESTS FOR JUDICIAL NOTICE

The Court DENIES Inter-Con’s request for judicial notice of a summary judgment ruling in a similar case (Singh) heard by Judge Walsh. While the Court is aware of this ruling (which is currently being appealed), unpublished California opinions “must not be cited or relied on by a court or a party in any other action.”  (Cal. Rules of Court, rule 8.1115(a); see also Schachter v. Citigroup, Inc. (2005) 126 Cal.App.4th 726, 738 [a trial court ruling has no precedential value]; Drummond v. Desmarais (2009) 176 Cal.App.4th 439, 448, fn. 4 [“in the absence of some additional showing—such as the conditions for claim or issue preclusion—the actions of other judges are simply irrelevant”].)  By the same token, the Court DENIES Plaintiff’s request for judicial notice of another ruling in Singh (Ex. A to Plaintiff’s request). The Court admonishes the parties not to rely on such decisions in the future.  

The Court GRANTS Plaintiff’s request for judicial notice of an analysis by the Office of Senate Floor Analyses concerning a 2016 bill that amended Section 201.3 (Ex. C to Plaintiff’s request). (Evid. Code, § 452, subd. (c).) To the extent relevant to the legislative history and only to that extent, the Court also GRANTS Plaintiff’s request for judicial notice of Judge Kirwan’s statement of decision in another related case, Huff v. Securitas Security Services USA, Inc. (Super. Ct. Santa Clara County, 2020, No. 2010-1-CV-172614) (Huff). (Evid. Code, § 452, subd. (d).)

Finally, Defendant requests judicial notice of additional legislative history materials concerning the 2016 bill on reply, and that request is also GRANTED. (Evid. Code, § 452, subd. (c).)

IV. SECTION 201.3

The parties initially dispute whether what the Court will call the “90-day exemption” established by subdivision (b)(6) of Section 201.3 could apply to Plaintiff’s employment as a guard in the security services industry as a matter of law. They further dispute whether, if the exemption could apply to Plaintiff’s employment, it applied to his specific assignment as a factual matter, and what standard governs that question.

Because issues of statutory interpretation are at the heart of the parties’ dispute and ultimately determine the outcome of Inter-Con’s motion, the Court will address those issues first.

A. Principles Governing Statutory Construction

 As explained by the California Supreme Court,         

 

[w]hen we interpret a statute, our fundamental task is to determine the Legislature’s intent so as to effectuate the law’s purpose.  We first examine the statutory language, giving it a plain and commonsense meaning.  We do not examine that language in isolation, but in the context of the statutory framework as a whole in order to determine its scope and purpose and to harmonize the various parts of the enactment.  If the language is clear, courts must generally follow its plain meaning unless a literal interpretation would result in absurd consequences the Legislature did not intend.  If the statutory language permits more than one reasonable interpretation, courts may consider other aids, such as the statute’s purpose, legislative history, and public policy.         

 

(City of San Jose v. Superior Court (2017) 2 Cal.5th 608, 616-617 (City of San Jose), internal citation and quotation omitted.)         

 

“[S]tatutory language, even if it appears to have a clear and plain meaning when considered in isolation, may nonetheless be rendered ambiguous when the language is read in light of the statute as a whole or in light of the overall legislative scheme.” (People v. Valencia (2017) 3 Cal.5th 347, 360.)  Courts must accordingly “consider portions of a statute in the context of the entire statute and the statutory scheme of which it is a part, giving significance to every word, phrase, sentence, and part of an act in pursuance of the legislative purpose.”  (City of San Jose, supra, 2 Cal.5th at p. 617.)         

B. Text of the Statute

Section 201.3 governs the payment of wages to employees of “temporary services employers” as defined by subdivision (a) of the statute. (For simplicity’s sake, the Court will refer to employees of temporary services employers as “temporary employees.”) Plaintiff alleges that Inter-Con is a temporary services employer, and that issue is not disputed for purposes of the present motion.

Subdivision (b) of Section 201.3 establishes timing requirements for the payment of wages to temporary employees. It provides in relevant part:

(1)

(A) Except as provided in paragraphs (2) to (5), inclusive, if an employee of a temporary services employer is assigned to work for a client, that employee’s wages are due and payable no less frequently than weekly, regardless of when the assignment ends, and wages for work performed during any calendar week shall be due and payable not later than the regular payday of the following calendar week. A temporary services employer shall be deemed to have timely paid wages upon completion of an assignment if wages are paid in compliance with this subdivision.

(B) Except as provided in paragraphs (2) to (5), inclusive, if an employee of a temporary services employer in the security services industry is a security guard who is registered pursuant to Chapter 11.5 (commencing with Section 7580) of Division 3 of the Business and Professions Code, is employed by a private patrol operator licensed pursuant to that chapter, and is assigned to work for a client, that employee’s wages are due and payable no less frequently than weekly, regardless of when the assignment ends, and wages for work performed during any workweek, as defined under Section 500, shall be due and payable not later than the regular payday of the following workweek.

(2) If an employee of a temporary services employer is assigned to work for a client on a day-to-day basis, that employee’s wages are due and payable at the end of each day, regardless of when the assignment ends, if each of the following occurs: [¶] … [¶]

(3) If an employee of a temporary services employer is assigned to work for a client engaged in a trade dispute, that employee’s wages are due and payable at the end of each day, regardless of when the assignment ends.

(4) If an employee of a temporary services employer is assigned to work for a client and is discharged by the temporary services employer or leasing employer, wages are due and payable as provided in Section 201.

(5) If an employee of a temporary services employer is assigned to work for a client and quits his or her employment with the temporary services employer, wages are due and payable as provided in Section 202.

(6) If an employee of a temporary services employer is assigned to work for a client for over 90 consecutive calendar days, this section does not apply unless the temporary services employer pays the employee weekly in compliance with paragraph (1) of subdivision (b).

C. Availability of the 90-Day Exemption to Security Guards

Defendant contends that Plaintiff was “assigned to work for” a single client for over 90 consecutive calendar days, so the 90-day exemption established by subdivision (b)(6) of Section 201.3 applied to his employment. Plaintiff responds that the exemption cannot be applied to his employment because he was a security guard employed by a temporary services employer in the security services industry, as described in subdivision (b)(1)(B).

To interpret these provisions, the Court must address them in context. So it observes that the overall structure of subdivision (b) is as follows. First, paragraph (1) of subdivision (b) provides for weekly payment to temporary employees “[e]xcept as provided in paragraphs (2) through (5),” addressing the daily payment of wages in certain circumstances and the payment of final wages when an employee is discharged from or quits his or her employment. Paragraph (1)(A) provides that, for most temporary employees, “wages for work performed during any calendar week shall be due and payable not later than the regular payday of the following calendar week.” Paragraph (1)(B) provides that, for security guards employed as described in that paragraph, “wages for work performed during any workweek … shall be due and payable not later than the regular payday of the following workweek.” The two subparagraphs otherwise identically require the weekly payment of wages to temporary employees “assigned to work for a client…, regardless of when the assignment ends….”

Paragraph (1) does not mention paragraph (6) or expressly incorporate it as an “exception” as with paragraphs (2) through (5). But paragraph (6) states that if a temporary employee “is assigned to work for a client for over 90 consecutive calendar days, this section does not apply unless the temporary services employer pays the employee weekly in compliance with paragraph (1) ….” The only way to interpret this paragraph to avoid rendering it a nullity is to deem it an exemption to the weekly pay requirement, as urged by Inter-Con. Plaintiff does not appear to dispute this point. The Court accordingly construes paragraph (6) as an exemption to paragraph (1)’s weekly pay requirement—and indeed, to all of Section 201.3, which paragraph (6) states “does not apply” to 90-day or longer assignments unless the employer actually pays the employee on a weekly basis.

While Plaintiff does not seem to dispute that paragraph (6) is an exemption to paragraph (1)(A), he takes issue with reading it as an exemption to paragraph (1)(B). But the plain language of the statute provides no basis to conclude that paragraph (6) interacts with subparagraph (B) of paragraph (1) in a different manner than subparagraph (A), so that security guards are somehow exempted from the 90-day exemption. Rather, as discussed above, the main difference between subparagraphs (A) and (B) is the requirement that weekly wages under paragraph (1) be paid on a “calendar week” versus a “workweek” basis.

Plaintiff argues that this interpretation conflicts with the legislative history surrounding the amendment of the statute to add subparagraph (B). In Plaintiff’s view, subparagraph (B) was added to exempt security guards from paragraph (6) following Judge Kirwan’s ruling in Huff. But based on the legislative history submitted by Plaintiff, the Court disagrees. It is true that the analysis discussed Huff and recognized that Judge Kirwan applied the 90-day exemption to security guards. But it apparently agreed with his interpretation of the exemption, stating that “[e]xisting law … [e]xempts temporary employees from the [weekly pay] requirements if the employee’s assignment is for 90 days or longer and the employee is not currently paid weekly.” (Pl.’s Req. for Judicial Notice, Ex. C, pp. 1-2.)

Explaining the need to amend the statute, the analysis focused on a different aspect of Judge Kirwan’s ruling in Huff:

However… the court used a calendar week of Sunday to Saturday, which is not the workweek utilized by Securitas. Rather, this is the default calendar week used by the Division of Labor Standards Enforcement for enforcement purposes. Securitas and other security firms utilize a Friday to Thursday workweek, which proponents note reflects the fact that their employees frequently work on the weekends, unlike many employers.

AB 1311 provides that, if a temporary employee is employed as a security officer, the employee’s wages are due weekly and due and payable on the regular payday of the following workweek.

(Pl.’s Req. for Judicial Notice, Ex. C, p. 2.) Therefore, as summarized by the analysis’s digest, “[t]his bill allows temporary services employers to pay temporary private security officers based on a workweek (Friday-Thursday) rather than a calendar week (Sunday-Saturday).” (Id., p. 1.)

The legislative history confirms that, as reflected in the plain language of the statute, subparagraph (B) was added to provide that security guards be paid on a workweek rather than a calendar week basis when paragraph (1) applies. The 90-day exemption established by paragraph (6) was affirmed rather than criticized in the analysis submitted by Plaintiff and was left untouched by the 2016 bill, despite the Legislature’s clear understanding of Judge Kirwan’s ruling applying it to security guards.

In sum, the 90-day exemption applies to security guards in the same manner that it applies to other temporary services employees. So the Court must consider how to interpret it.

D. Construction of the 90-Day Exemption

Again, the 90-day exemption provides:

(6) If an employee of a temporary services employer is assigned to work for a client for over 90 consecutive calendar days, this section does not apply unless the temporary services employer pays the employee weekly….

Inter-Con contends that the exemption must be construed to apply to assignments the employer intends will last for at least 90 days, regardless of how long the assignment actually lasts. This interpretation is consistent with the language of the statute, which speaks to how long the employee “is assigned to work for” a particular client, and not (like other provisions of Section 201.3) when the assignment ends or how long the assignment actually lasts. For example, it is consistent with the way the same language is used in paragraph (2) of subdivision (b), which provides that temporary employees “assigned to work for a client on a day-to-day basis” be paid daily in certain situations, “regardless of when the assignment ends.” Throughout the statute, the “assigned to work for” language is used in a prospective manner, looking at the expectations or intentions for the assignment at the time it is made. And this interpretation makes sense on a practical level, because it allows the employer to determine at the beginning of an assignment how an employee needs to be paid.

Plaintiff responds that “[t]he plain language of section 201.3(b)(6) does not contain an ‘intent’ requirement, but simply states that the employee ‘is assigned to work for a client for over 90 consecutive calendar days …. In other words, the employee must have in fact been assigned to work and did in fact work for a particular client for over 90 consecutive calendar days.” Thus, it appears that Plaintiff disputes the “employer intent” part of Inter-Con’s position, but agrees that the exemption should be read to depend on how long an assignment is “for,” from a forward-looking perspective. Plaintiff further contends that the 90-day exemption should only apply if an employee goes on to work at an assignment for at least 90 days in reality.

The Court sees Plaintiff’s point insofar as Defendant’s proposed “employer intent” standard may not make sense in cases where such intent is vague or undisclosed to the employee. And the issue of what to do about assignments that are expected to last for over 90 days, but don’t in reality, is perhaps a more complicated one. But here, the evidence does not require the Court to delve too far into the nuances of the “assigned to work” language, because Defendant shows that Plaintiff was both “in fact … assigned to work and did in fact work for a particular client for over 90 consecutive calendar days.”

V. THE PARTIES’ EVIDENCE

A. Defendant’s Evidence

Defendant submits a declaration by its “Vice President of Operations Global HQ,” Michael Beairsto. Mr. Beairsto declares that he has helped manage several high-profile contracts for Inter-Con, including its contract with the California Highway Patrol (“CHP”). For reasons explained in more detail in Mr. Beairsto’s declaration, Inter-Con “maintains a ‘Project Management Business Model,’ where it hires an employee with the expectation that it will assign the employee to a specific client for the entire duration of its contract with the client.” Inter-Con’s typical contract is for a term of three to five years, and the majority of its contracts are renewed or extended past the original term. Because it takes Inter-Con approximately 120 days to recover the cost of onboarding a guard for a specific contract, it does not assign guards for less than 120 days.

Mr. Beairsto declares that Plaintiff was assigned to a contract with CHP that ran from 2016 through 2019. “Inter-Con assigned Plaintiff to the CHP Contract with the intention he would work for the CHP until the end of the CHP Contract, for over 90 consecutive calendar days.” Inter-Con hired and assigned Plaintiff to work under this contract in October 2018. The contract ultimately expired in July 2019, but Inter-Con continued to perform emergency services under it for a few more months. Mr. Beairsto’s declaration authenticates the original CHP contract with a term of March 2016 to January 2018 (Ex. 1 to Defendant’s Compendium of Evidence), along with amendments extending its term to January 2019 (Ex. 2) and then to July 2019 (Ex. 3).

Mr. Beairsto declares that Plaintiff worked over 100 shifts under the contract, but resigned on August 1, 2019 due to a shortage of hours. (Defendant maintains that this resulted from Plaintiff’s performance issues as well as Inter-Con’s eventual loss of the CHP contract.) Mr. Beairsto declares that while assigned under the CHP contract, Plaintiff was assigned to multiple “posts,” including the San Jose State Building, the Redwood City Department of Motor Vehicles , the Oakland Employment Development Department, the Fremont Department of Motor Vehicles, and the San Jose Driver License Processing Center Department of Motor Vehicles. But these assignments were all for CHP.

On January 29, 2019, Plaintiff contacted an Inter-Con administrator about working on Inter-Con’s contract with another client, Vulcan Inc. He trained for 16 hours to work on that contract, but never worked a full shift. (Defendant maintains that this is because Vulcan deferred scheduling Plaintiff once it learned of his issues on the CHP contract.)

This evidence satisfies Inter-Con’s initial burden to show that Plaintiff was assigned to the CHP contract for over 90 consecutive calendar days. It also shows that Plaintiff did, in fact, work on the CHP assignment for over 90 consecutive calendar days.

B. Plaintiff’s Opposition

Plaintiff does not object to Mr. Beairsto’s declaration or any of the documents it authenticates. Rather, he argues that the terms of the CHP contract belie the conclusion that assignments were guaranteed to be for at least 90 days, because various provisions allowed CHP to replace security guards, or to change the number of hours or the duration of the services it required. Plaintiff also seems to argue that the different posts he was assigned to were in fact different “clients.” But the deposition testimony by Mr. Beairsto he relies on does not support this argument and instead confirms that CHP was the only client Plaintiff was actually assigned to. (See Ex. G to the Decl. of Edward W. Choi.)

Plaintiff’s arguments do not raise a triable issue concerning whether he was assigned to CHP for at least 90 days. The fact that CHP retained certain contractual rights that could hypothetically impact a security guard’s assignment does not mean that the initial assignment was not made on a long-term basis. Notably, subdivision (a)(4) of Section 201.3 defines a “client” as “the person with whom a temporary services employer has a contractual relationship to provide the services of one or more individuals employed by the temporary services employer.” And subdivision (a)(1)(C) expressly contemplates that a “temporary services employer” may “[r]etain[] the authority to assign or reassign a worker to another client or customer when the worker is determined unacceptable by a specific client or customer.” So the statute contemplates that a client may reserve this specific contractual right, but does not provide for different treatment of such contracts. Again, this is consistent with the fact that the mere possibility of reassignment does not impact the initial nature of the assignment—particularly where, as here, no reassignment occurred and the assignment in fact lasted for well over 90 days.

Plaintiff also points to various documents he says were produced by Inter-Con, which are attached to a declaration by his counsel. Inter-Con objects to this evidence on reply, and its objections based on hearsay and lack of proper authentication are SUSTAINED. In any event, these documents are entirely consistent with Mr. Beairsto’s declaration and deposition testimony. While not every one of them mentions CHP, the “Employee Action Notice (NEW HIRE)” apparently associated with Plaintiff’s hiring lists his “division” as “CHPBAY” and his job title as “Bay Flex Officer.” This is consistent with Mr. Beairsto’s declaration that “Inter-Con hired and assigned Plaintiff to work as a security guard under the CHP Contract in the Bay area,” albeit at different job sites. An email submitted by Plaintiff lists his assignment as “NoCal CHP” and confirms that he “can not work any contract other than what [he is] assigned.” Finally another document appears to show that Plaintiff was assigned to work at Inter-Con’s own offices for six weeks in early 2019 while he recovered from an injury. But this does not show that Plaintiff was assigned to a different client or that his initial assignment to CHP was not for at least 90 days. And Plaintiff provides no authority or argument suggesting that this type of interruption to his assignment precludes the application of the 90-day exemption.

For all these reasons, even if the evidence submitted by Plaintiff were properly authenticated (which it isn’t), Plaintiff fails to raise a triable issue of material fact concerning whether he was assigned to work for CHP for over 90 consecutive calendar days.

VI. CONCLUSION

CHP’s motion for summary adjudication is GRANTED. Plaintiff’s Section 201.3 claim fails because Inter-Con intended to—and did—assign Plaintiff to the same client for over 90 consecutive calendar days.

The Court notes that this ruling applies only to Plaintiff’s own assignment, and expresses no opinion about the merits of the Section 201.3 claim as to other allegedly aggrieved employees.

The Court will prepare the order.

***

LAW AND MOTION HEARING PROCEDURES

The Court rescinded, effective June 21, 2021, all prior general orders restricting courthouse access.  Remote appearances for complex civil matters are still permitted, but are no longer mandatory.  (See General Order Rescinding Portion of May 6, 2020 General Order Concerning Complex Civil Actions, available at

RescindingPortionof050621GeneralOrderConcerningComplexCivilActions.pdf.)  If a party gives notice that a tentative ruling will be contested, any party seeking to participate in the hearing remotely should contact CourtCall.

Public access to hearings is available on a listen-only line by calling 888-808-6929 (access code 2752612).

State and local rules prohibit recording of court proceedings without a court order.  These rules apply while in court and also while participating in a hearing remotely or listening in on a public access line.  No court order has been issued which would allow recording of any portion of this motion calendar.

The court does not provide court reporters for proceedings in the complex civil litigation departments.  Any party wishing to retain a court reporter to report a hearing may do so in compliance with this Court’s October 13, 2020 Policy Regarding Privately Retained Court Reporters.  The court reporter may participate remotely and need not be present in the courtroom.  

The court does not provide court reporters for proceedings in the complex civil litigation departments.  Any party wishing to retain a court reporter to report a hearing may do so in compliance with this Court’s October 13, 2020 Policy Regarding Privately Retained Court Reporters.  The court reporter may participate remotely and need not be present in the courtroom.  

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Case Name: Eileen A. Staats v. City of Palo Alto

Case No.: 2015-1-CV-284956

This is a class action alleging that the City of Palo Alto unlawfully imposed a Utility Users Tax (“UUT”) on customers of telephone service providers. The parties reached a settlement, which the Court (Judge Walsh) preliminarily approved in an order filed on November 6, 2020. The factual and procedural background of the action and the Court’s analysis of the settlement and settlement class are set forth in that order.

  

Before the Court are Plaintiff Eileen Staats’s motions for final approval of the settlement and for approval of her attorney fees, costs, and service award.  Plaintiff’s motions are unopposed. As discussed below, the Court GRANTS both motions, but with a significant reduction in attorney fees.

 

I. LEGAL STANDARD FOR SETTLEMENT APPROVAL

Generally, “questions whether a [class action] settlement was fair and reasonable, whether notice to the class was adequate, whether certification of the class was proper, and whether the attorney fee award was proper are matters addressed to the trial court’s broad discretion.”  (Wershba v. Apple Computer, Inc. (2001) 91 Cal.App.4th 224, 234–235 (Wershba), disapproved of on other grounds by Hernandez v. Restoration Hardware, Inc. (2018) 4 Cal.5th 260.)   

   

In determining whether a class settlement is fair, adequate and reasonable, the trial court should consider relevant factors, such as the strength of plaintiffs’ case, the risk, expense, complexity and likely duration of further litigation, the risk of maintaining class action status through 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.    

 

(Wershba, supra, 91 Cal.App.4th at pp. 244–245, internal citations and quotations omitted.)

In general, the most important factor is the strength of the plaintiffs’ case on the merits, balanced against the amount offered in settlement. (See Kullar v. Foot Locker Retail, Inc. (2008) 168 Cal.App.4th 116, 130 (Kullar).) But the trial court is free to engage in a balancing and weighing of factors depending on the circumstances of each case.  (Wershba, supra, 91 Cal.App.4th at p. 245.)  The trial court must examine the “proposed settlement agreement to the extent necessary to reach a reasoned judgment that the agreement is not the product of fraud or overreaching by, or collusion between, the negotiating parties, and that the settlement, taken as a whole, is fair, reasonable and adequate to all concerned.”  (Ibid., citation and internal quotation marks omitted.)

The burden is on the proponent of the settlement to show that it is fair and reasonable.  However “a presumption of fairness exists where: (1) the settlement is reached through arm’s-length bargaining; (2) investigation and discovery are sufficient to allow counsel and the court to act intelligently; (3) counsel is experienced in similar litigation; and (4) the percentage of objectors is small.”    

 

(Wershba, supra, 91 Cal.App.4th at p. 245, citation omitted.)  The presumption does not permit the Court to “give rubber-stamp approval” to a settlement; in all cases, it must “independently and objectively analyze the evidence and circumstances before it in order to determine whether the settlement is in the best interests of those whose claims will be extinguished,” based on a sufficiently developed factual record.  (Kullar, supra, 168 Cal.App.4th at p. 130.)

II. TERMS AND ADMINISTRATION OF SETTLEMENT

The gross maximum settlement amount is $1,275,000. Attorney fees and costs of up to $425,000 (one-third of the maximum settlement) will be paid from the settlement fund. The named plaintiff will also seek an enhancement award of $10,000. The approximately $145,535 in notice and administrative costs associated with the settlement will be borne half by Plaintiff’s attorneys from their fee and cost award and half by the City.

The net settlement will be distributed to individual class members through a claims process as follows:

• Five or Fewer Phone Lines. Claimants with five or fewer phone lines can seek a refund of $8.50 per phone line.

• Six to Ten Phone Lines. Claimants with six to ten phone lines can seek a refund of $8.50 per phone line for the first five phone lines and $7.50 per phone line for the remaining phone lines.

• More than Ten Phone Lines. Claimants with more than ten phones lines can seek a refund of $8.50 per phone line for the first five phone lines, $7.50 per phone line for the next five phone lines, and $6.50 per phone line for the remaining phone lines.

Class members were given 120 days from the date of mailing to return their claim forms with supporting documentation. In an order filed on October 20, 2021, the Court approved the parties’ stipulation to an amended process concerning the treatment of untimely and deficient claims. Funds that remain unclaimed following this process will revert to the City. (See Code Civ. Proc., § 384, subd. (c) [section 384 concerning unclaimed funds in class actions does not apply to a class action against a public entity].)

  Class members will release the City from “any and all claims, obligations, promises, demands, rights, actions, causes of action, costs, legal fees, expert fees, consultant fees, expenses, damages, and liability of any kind whatsoever, known or unknown, arising from, concerning, or relating to the Action….”

The notice process has now been completed.  There were no objections to the settlement.  Three individuals had previously opted out after the Court granted class certification in 2018; additional opt-outs were not accepted in connection with the settlement. Direct notice was mailed to 85,361 City residents potentially eligible for a settlement payment.[6] As described in more detail in the administrator’s declaration, a digital notice effort targeted class members who may have moved outside of Palo Alto, and short form notices were distributed to media outlets as a press release and published in the Palo Alto Daily Post.

Of the 85,361 notice packets, 7,330 were returned as undeliverable and 6 were re-mailed to updated addresses. As of October 20, 2021, 1,559 claim forms were submitted, representing a claims rate of about 1.8 percent.

This claims rate is extremely low. But consumer class actions often have a relatively low claims rate. (See Duran v. Obesity Research Institute, LLC (2016) 1 Cal.App.5th 635, 639, fn. 1 [noting that settlement claims rates are “notoriously low” and regularly amount to 10 percent or less]; Schneider v. Chipotle Mexican Grill, Inc. (N.D.Cal. 2020) 336 F.R.D. 588, 599 [.83 percent claims rate “is on par with other consumer cases, and does not otherwise weigh against approval”]; In re Facebook Biometric Info. Privacy Litig. (N.D.Cal. Feb. 26, 2021, No. 15-cv-03747-JD) 2021 U.S.Dist.LEXIS 36801, at *10 [claims rate of 4 to 9 percent is typical for consumer class actions].) And the Court is persuaded that notice was the best practicable under the circumstances in this case.

The Court continued the final approval hearing so that the administrator could submit a fuller accounting of the claims process. As described in more detail in his declaration, the administrator explains that 1,222 claims worth a total of $19,277.50 will be allowed in full; 137 claims will be allowed in part, with a present total allowed value of $1,359.00 and a potential total value, if cured, of $3,298.50; and 158 claims, with a potential total value of $5,463.00, will only be allowed if they are cured. 42 claims will be rejected, with a total value of $981.50. Thus, the allowable claims will total no more than $28,039, a little over two percent of the gross maximum settlement.

At preliminary approval, the Court found that the proposed settlement provides a fair and reasonable compromise to Plaintiff’s claims.  It finds no reason to deviate from these findings now, especially considering that there are no objections.  The Court accordingly finds that the settlement is fair and reasonable for purposes of final approval, despite the disappointingly low claims rate. It accordingly GRANTS final approval.

   

III. ATTORNEY FEES, COSTS, AND INCENTIVE AWARD

Plaintiff seeks a combined fee and expense award of $425,000, as stated in the class notice.  The request amounts to 33 percent of the maximum settlement fund. Subtracting the requested $10,000 incentive fee and $219,155.92 in administrative and litigation costs leaves $195,844.08 to cover attorney fees, about half of the $369,740 combined lodestar claimed by the three firms that worked on the case and about 15.4 percent of the maximum settlement fund.

“Courts recognize two methods for calculating attorney fees in civil class actions: the lodestar/multiplier method and the percentage of recovery method.” (Wershba, supra, 91 Cal.App.4th at p. 254.) Plaintiff submits that the requested fee and cost award is reasonable under either method. Citing Lealao v. Beneficial California, Inc. (2000) 82 Cal.App.4th 19 (Lealao), she urges that the claims-made nature of the settlement “does not impact calculation of the relevant common fund amount” for purposes of the percentage method. But Lealao looked to the substantial value of the claims actually submitted in that case, not just the maximum potential value of the settlement as Plaintiff urges here. (See Lealao, supra, 82 Cal.App.4th at pp. 50–53 [discussing the $14.7 million maximum value of the case as well as the $7.35 million in valid claims].)[7] As explained in Laffitte v. Robert Half Internat. Inc. (2016) 1 Cal.5th 480 (Laffitte), the “constructive common fund” addressed by Lealao—like the fund in this case—was not a “true common fund … without any reversion to [the] defendant ….” (Id. at p. 503.)[8] Lealao held “that pure percentage fees have been rejected by the California Supreme Court” for funds like these. (Lealao, supra, 82 Cal.App.4th at p. 37, italics original.) In such cases, so long as the value of the class recovery can be monetized with a reasonable degree of certainty, a trial court can adjust or cross-check a lodestar award based on the percentage of the benefit method. (Id. at pp. 49–53.) But the Court must start with the lodestar method.

Under Lealao, it would not be appropriate to award fees as a percentage of the maximum settlement fund here, particularly without considering the value of the claims that were actually submitted. Notably, the most recent declaration by the claims administrator confirms that the value of the claims will be very low, consistent with the extremely low claims rate. The amount paid to class members in this case will be far below counsel’s fee request, and even their costs.

Still, the Court finds that some fee and cost award based on an adjusted lodestar is appropriate. Plaintiff’s counsel achieved class certification through time-consuming, hotly-contested motion practice. The issues were complex and involved the evaluation of expert testimony and an additional round of briefing directed by the Court. Plaintiff then defended, but lost, a motion for summary adjudication of the claims accruing before December 23, 2013, based on the claims presentation requirement prescribed by the Government Code. Following this loss on the merits, Plaintiff continued to diligently pursue the remaining claims although their value was significantly diminished, and achieved a settlement representing 30–44 percent of the value of those claims.[9] As explained by Judge Walsh at preliminary approval, this is a good result for those class members who continue to have viable claims, “considering the risks on the merits as well as the challenges of proof addressed at class certification and the associated risk of decertification.”

While the use of a claims process reduced class members’ actual recoveries, that process was necessary in this case. As addressed at class certification, the UUT was billed and collected by a number of different telephone service providers rather than the City, and it was expected that class members would have to self-identify and provide documentation to participate in any recovery.[10] Ultimately, Plaintiff’s counsel did the best they could for class members who continued to have potential claims following summary adjudication, even as their own financial incentive was significantly reduced. The Court does not want to discourage such efforts by failing to approve a reasonable award of fee and costs. It turns to that analysis now.

As an initial matter, the cost component of the award requested by Plaintiff is reasonable and is approved. Notably, over $100,000 in costs are for notice to the class, both post-certification and in connection with the settlement. This notice was necessary to apprise class members of their rights and should certainly be compensated. The other costs also appear reasonably necessary to the litigation and are approved. Finally, Plaintiff requests a service award of $10,000.   To support her request, she submits a declaration describing her efforts on the case. Plaintiff estimates that she spent at least 100 hours on this matter, including over two days in connection with her deposition. The Court finds that the class representative is entitled to an enhancement award and the amount requested is reasonable.    

Turning to the fee component of the award, Plaintiff claims a lodestar of $369,740. The lodestar is based on 738 hours billed by Girardi Keese and Steele Cooper Law at rates of $125–750 per hour (with only 80 hours billed at a rate above $500), and 105 hours billed by Slovak, Baron, Empey, Murphy & Pinkney, LLP at $550 per hour. The Court finds the hours billed to the case and the hourly rates to be reasonable. As previously stated, the fee component of the award requested by Plaintiff is $195,844.08, only about half of the claimed lodestar.

However, in light of Plaintiff’s loss on the merits as to a large part of the class claims and the extremely low participation rate by class members potentially eligible to receive a settlement payment, the Court believes that the claimed fee component should be reduced by another 20%, which means the fee component will be $156,675.26. This reduced lodestar award strikes the right balance between undercompensating counsel for their successful efforts on behalf of a portion of the class, and over-incentivizing the prosecution of an action that ultimately did not deliver significant money to the class as a whole. With this reduction, the Court GRANTS the motion for fees and costs.

IV. ORDER AND JUDGMENT

  In accordance with the above, IT IS HEREBY ORDERED, ADJUDGED, AND DECREED THAT:      

 

Plaintiff’s motion for final approval is GRANTED. The previously certified class and four subclasses are defined as:

All persons, including individuals, non-corporate entities, and corporations, who have paid the City of Palo Alto Utility Users Tax (“UUT”) imposed by Palo Alto Municipal Code § 2.35.090 on the following services between August 1, 2006 to December 18, 2014: (1) “flat-rate” mobile telephone service that entitles the subscriber, upon payment of a periodic charge determined as a flat amount or upon the basis of total minutes, to an unlimited number of calls in an identified region; (2) “flat-rate,” separately billed long distance landline telephone service that entitles the subscriber, upon payment of a periodic charge determined as a flat amount or upon the basis of total minutes, to an unlimited number of calls in an identified region; (3) per-minute mobile telephone service; and/or (4) per-minute long distance landline telephone service. Not included in the class are persons who have paid the UUT only for separately billed local landline telephone services or local landline services “bundled” with mobile or long distance landline services in a plan that does not separately state the charge for the local service.  

Excluded from the class are the three individuals who submitted valid requests for exclusion.

Plaintiff’s motion for attorney fees and costs is GRANTED IN PART, with the attorney fee component of the award reduced to $156,675.26, for a total fee and cost award of $385,831.18.

Judgment shall be entered through the filing of this order and judgment.  (Code Civ. Proc., § 668.5.)  Plaintiff and the members of the class shall take from their complaint only the relief set forth in the settlement agreement and this order and judgment.  Pursuant to Rule 3.769(h) of the California Rules of Court, the Court retains jurisdiction over the parties to enforce the terms of the settlement agreement and the final order and judgment.      

 

The Court sets a compliance hearing for May 5, 2022 at 2:30 P.M. in Department 1.  At least ten court days before the hearing, class counsel and the settlement administrator shall submit a summary accounting of the net settlement fund identifying distributions made as ordered herein; the number and value of any uncashed checks; amounts remitted to the City; the status of any unresolved issues; and any other matters appropriate to bring to the Court’s attention. Counsel may appear at the compliance hearing remotely.    

The Court will prepare the order.

***

LAW AND MOTION HEARING PROCEDURES

The Court rescinded, effective June 21, 2021, all prior general orders restricting courthouse access.  Remote appearances for complex civil matters are still permitted, but are no longer mandatory.  (See General Order Rescinding Portion of May 6, 2020 General Order Concerning Complex Civil Actions, available at

RescindingPortionof050621GeneralOrderConcerningComplexCivilActions.pdf.)  If a party gives notice that a tentative ruling will be contested, any party seeking to participate in the hearing remotely should contact CourtCall.

Public access to hearings is available on a listen-only line by calling 888-808-6929 (access code 2752612).

State and local rules prohibit recording of court proceedings without a court order.  These rules apply while in court and also while participating in a hearing remotely or listening in on a public access line.  No court order has been issued which would allow recording of any portion of this motion calendar.

The court does not provide court reporters for proceedings in the complex civil litigation departments.  Any party wishing to retain a court reporter to report a hearing may do so in compliance with this Court’s October 13, 2020 Policy Regarding Privately Retained Court Reporters.  The court reporter may participate remotely and need not be present in the courtroom.  

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Case Name: SinCo Technologies PTE LTD v. XingKe Electronics (Dongguan) Co., Ltd., et al.

Case No.: 16CV301867

This action for breach of contract, business torts, and related claims was filed by Plaintiff and Cross-Defendant SinCo Technologies PTE LTD (“SinCo”) in 2016. Before the Court is SinCo’s motion for leave to file a proposed Fifth Amended Complaint (“5AC”). Defendants and Cross-Complainants XingKe Electronics (Dongguan) Co., Ltd. (“XingKe”), Liew Yew Soon aka Mark Liew, Ng Cher Yong aka Cy Ng, and Mui Liang Tjoa aka ML Tjoa (collectively, “Defendants”) oppose SinCo’s motion. As discussed below, the Court GRANTS SinCo’s motion.

The Court also addresses several motions to seal as detailed below.

I. MOTION FOR LEAVE TO FILE 5AC

The operative Fourth Amended Complaint (“4AC”) was filed on May 18, 2020. On April 30, 2021, Defendants moved for summary adjudication of most of the claims in the 4AC. On August 2, the Court granted summary adjudication of the 4AC’s claims for breach of the covenant of good faith and fair dealing as to all Defendants. It held that the claims, as alleged in the 4AC, were based solely on the “SinCo/DG Agreements,” and Singapore law does not recognize a duty of good faith and fair dealing arising from commercial contracts such as these. (See August 2, 2021 Order at pp. 9–13.) SinCo now seeks leave to file a 5AC that would add allegations concerning a duty of good faith and fair dealing arising from Mr. Liew, Mr. Ng, and Defendant Quek Seow Eng’s employment agreements with SinCo. (Decl. of Daniel E. Gaitan ISO Mot., Ex. 41, pp. 26–27.)

Defendants oppose SinCo’s motion on the grounds that Sinco has offered no explanation for its delay in seeking leave to amend, and the proposed new claims are already encompassed by either the claims that have been summarily adjudicated against SinCo or its surviving claims for breach of the duty of loyalty.

A. Legal Standard[11]

Section 473, subdivision (a)(1) of the Code of Civil Procedure states in pertinent part: “[t]he court may ... , in its discretion after notice to the adverse party, allow, upon any terms as may be just, an amendment to any pleading or proceeding in other particulars ....”  (Atkinson v. Elk Corp. (2003) 109 Cal.App.4th 739, 760 (Atkinson).)  In considering a motion for leave to amend, “courts are bound to apply a policy of great liberality in permitting amendments … at any stage of the proceedings, up to and including trial.”  (Id. at p. 761.)  “[I]t is a rare case” in which a court will be justified in denying a party leave to amend his pleadings.  (Morgan v. Superior Court (1959) 172 Cal.App.2d 527, 530.)  “If the motion to amend is timely made and the granting of the motion will not prejudice the opposing party, it is error to refuse permission to amend and where the refusal also results in a party being deprived of the right to assert a meritorious cause of action or a meritorious defense, it is not only error but an abuse of discretion.”  (Ibid.)      

 

However, the policy of liberality in permitting amendments should be applied only where no prejudice is shown to the adverse party.  (Atkinson, supra, 109 Cal.App.4th at p. 761.)  Where an amendment would require substantial delay in the trial date and substantial additional discovery; would change not only the specific facts and causes of action pled, but the tenor and complexity of the complaint as a whole; and where no reason for the delay in seeking leave to amend is given, refusal of leave to amend is not an abuse of discretion.  (See Magpali v. Farmers Group (1996) 48 Cal.App.4th 471, 486–488 [affirming denial of request to amend made during trial].)  “Even if a good amendment is proposed in proper form, unwarranted delay in presenting it may – of itself – be a valid reason for denial,” which “may rest upon the element of lack of diligence in offering the amendment after knowledge of the facts, or the effect of the delay on the adverse party.”  (Roemer v. Retail Credit Co. (1975) 44 Cal.App.3d 926, 939–940 [trial court appropriately denied request to amend answer made during trial]; see also P & D Consultants, Inc. v. City of Carlsbad (2010) 190 Cal.App.4th 1332, 1345 [plaintiff did not seek leave to amend until after trial readiness conference, amendment would require additional discovery and might prompt a demurrer or other pretrial motion, and plaintiff’s explanation for the delay was inadequate].)

In addition, “ ‘leave to amend should not be granted where, in all probability, amendment would be futile.’ ” (See Foroudi v. The Aerospace Corp. (2020) 57 Cal.App.5th 992, 1000, quoting Vaillette v. Fireman’s Fund Ins. Co. (1993) 18 Cal.App.4th 680, 685, italics original.)

B. Discussion

As an initial matter, the Court agrees with Defendants that SinCo should have proposed the amendment at issue earlier. But Defendants claim no prejudice from the delay, and SinCo establishes that they will suffer none. Unlike the cases discussed above where delay supported the denial of leave to amend, there is plenty of time before trial and no indication that the proposed amendment will necessitate additional discovery or motion practice. So the Court will not deny SinCo leave to amend based on delay.

Defendants also urge that the Court’s order granting summary adjudication recognized SinCo’s argument that Mr. Ng and Mr. Liew had duties of good faith and fair dealing arising from their employment contracts, but rejected the notion that there is such a duty under Singapore law. But to the contrary, the Court found that SinCo had not alleged a duty of good faith and fair dealing arising from Mr. Ng and Mr. Liew’s employment contracts—only from the “SinCo/DG Agreements”—and there was no such duty associated with commercial contracts under Singapore law. So this argument lacks merit.

Defendants’ final argument is that the proposed amendment would be futile because “any duty of loyalty owed to an employer by employees under Singapore law is subsumed within the duty of good faith and fidelity…,” so the proposed amendment would merely duplicate SinCo’s existing claims for breach of the duty of loyalty. Defendants submit a declaration by an expert in Singapore law, who states that “[u]nder Singapore law, the implied duty of good faith and fidelity covers the du[t]y of loyalty” (italics added) and “[t]here is however no wider duty of good faith (insofar as such duty encompasses some positive duties (e.g. a positive duty to inform, invite comments, and maintain the employer-employee relationship) and fetters the freedom of parties) under Singapore law ….” (Decl. of Ho Wei Jie ISO Opp., ¶¶ 4–5.) On reply, SinCo emphasizes that Defendants’ expert agrees that Singapore law recognizes a duty of good faith and fair dealing arising from employment contracts, and disputes Defendants’ reading of the relevant cases to conclude that this duty merely duplicates the duty of loyalty.

The present motion is not the place for the Court to resolve this dispute. Even if Defendants are correct and the proposed 5AC merely adds a claim for breach of the same duty already asserted in another claim, this will not prejudice Defendants. And the Court does not find Defendants’ expert declaration to be entirely clear: it seems to allow for the possibility that the duty of good faith is somewhat different or broader than the duty of loyalty. In the Court’s view, it is worthwhile to permit the amendment, to make it clear that SinCo is asserting a claim (or claims) under the full scope of the duty (or duties) recognized by Singapore law. The Court will permit the amendment.

C. Conclusion

The Court GRANTS SinCo’s motion for leave to file the 5AC. SinCo shall file the 5AC within 10 calendar days of the filing of this order.

II. MOTIONS TO SEAL

SinCo moves to file under seal certain materials submitted in connection with its motion for leave to amend.

Also before the Court are the following additional motions to seal, which were continued from July 15, 2021 and September 16, 2021:

• Defendants’ April 30, 2021 motion to seal the unredacted memorandum of points and authorities, separate statement of undisputed facts, and Declaration of Kathleen E. Alparce supporting their motion for summary adjudication, as well as numerous exhibits and portions of exhibits to the Alparce Declaration; and

• SinCo’s June 1, 2021 motion to seal its unredacted opposition to the motion for summary adjudication, separate statement, and supporting Declaration of Daniel E. Gaitan, as well as many exhibits and portions of exhibits to the Gaitan Declaration.

On October 1, 2021, SinCo filed a supplemental motion/joinder in these continued motions. On October 12, 2021, Defendants filed a supplemental brief regarding the same motions.

A. Legal Standard

“The court may order that a record be filed under seal only if it expressly finds facts that establish: (1) There exists an overriding interest that overcomes the right of public access to the record; (2) The overriding interest supports sealing the record; (3) A substantial probability exists that the overriding interest will be prejudiced if the record is not sealed; (4) The proposed sealing is narrowly tailored; and (5) No less restrictive means exist to achieve the overriding interest.”  (Cal. Rules of Court, rule 2.550(d).)  

“Courts have found that, under appropriate circumstances, various statutory privileges, trade secrets, and privacy interests, when properly asserted and not waived, may constitute overriding interests.”  (In re Providian Credit Card Cases (2002) 96 Cal.App.4th 292, 298, fn. 3 (Providian).)  In addition, confidential matters relating to the business operations of a party may be sealed where public revelation of the information would interfere with the party’s ability to effectively compete in the marketplace.  (See Universal City Studios, Inc. v. Superior Court (2003) 110 Cal.App.4th 1273, 1285–1286.)

Where some material within a document warrants sealing, but other material does not, the document should be edited or redacted if possible, to accommodate both the moving party’s overriding interest and the strong presumption in favor of public access.  (Cal. Rules of Court, rule 2.550(d)(4), (5).)  In such a case, the moving party should take a line-by-line approach to the information in the document, rather than framing the issue to the court on an all-or-nothing basis. (Providian, supra, 96 Cal.App.4th at p. 309.)

But in actions for trade secret misappropriation, the court “shall preserve the secrecy of an alleged trade secret by reasonable means, which may include … sealing the records of the action ….”  (Civ. Code, § 3426.5.)  The usual sealing rules do not apply to records such as these, which “are required to be kept confidential by law.”  (Cal. Rules of Court, rule 2.550(a)(2); see Providian, supra, 96 Cal.App.4th at pp. 298–299 [“a mandatory confidentiality requirement … is imposed … in actions initiated pursuant to the Uniform Trade Secrets Act for misappropriation of trade secrets”].)  While the Court retains the authority to unseal claimed secrets that are not even arguably secret, it must generally preserve the confidentiality of claimed secrets until such time as that information is finally adjudged not to be a trade secret. (See Cypress Semiconductor Corporation v. Maxim Integrated Products, Inc. (2015) 236 Cal.App.4th 243, 255.)

Rule 2.550 also does not directly apply to “discovery motions and records filed or lodged in connection with discovery motions or proceedings.”  (See Cal. Rules of Court, rule 2.550(a)(3); H.B. Fuller Co. v. Doe (2007) 151 Cal.App.4th 879, 892–893 (H.B. Fuller) [the discovery process would be impeded if a presumptive right of public access to records disclosed under protective orders and filed in connection with routine discovery motions were imposed].) And even in non-discovery proceedings, discovery materials not submitted as a basis for adjudication are not directly subject to the sealed records rules. (See Mercury Interactive Corp. v. Klein (2007) 158 Cal.App.4th 60, pp. 103–104.) Nonetheless, even as to discovery materials not directly subject to rule 2.550, a party moving for leave to file records under seal must identify the specific information claimed to be entitled to confidentiality and the nature of the harm threatened by disclosure.  (See H.B. Fuller, supra, 151 Cal.App.4th at p. 894.)

B. Continued April 30, 2021 Motion to Seal

Defendants withdraw their April 30, 2021 motion as to the memorandum of points and authorities, separate statement, and Alparce Declaration supporting their motion for summary adjudication, as well as the majority of the exhibits. They maintain their request as to Exhibits 6, 49, and 50 to the Alparce Declaration only, which they contend reflect their own and third parties’ confidential and proprietary information. Having reviewed these exhibits, the Court finds that the factors set forth by rule 2.550(d) are satisfied as to this material.

SinCo has filed more narrowly redacted versions of the memorandum of points and authorities, separate statement, and Alparce Declaration with exhibits, but contends that the narrower set of customer identities and related information it seeks to maintain under seal has not been publicly filed. Defendants apparently believe that some portion of this information has been publicly filed, but do not provide any evidence or specifics in support of their general assertion. The parties shall meet and confer about this issue. But unless they agree otherwise or Defendants substantiate their position, the Court will grant SinCo’s motion to seal the redacted information. It finds that the factors set forth by rule 2.550(d) are satisfied as to this information.

Finally, Defendants contend that SinCo improperly filed some unspecified documents on the public docket. (And it does appear that at least Exhibit 6 to the Alparce Declaration was publicly filed.) The parties shall meet and confer about this issue and contact the Complex Coordinator to correct any inadvertent public filings.

To conclude, SinCo’s and Defendants’ narrowed requests to seal information addressed by Defendants’ April 30, 2021 motion to seal are GRANTED.

C. Continued June 1, 2021 Motion to Seal

SinCo has also narrowed its proposed redactions as to the material at issue in its June 1, 2021 motion to seal. Defendants do not seek to file any of this material under seal, and again appear to assert—but without supporting evidence—that SinCo is trying to seal some information that has been publicly filed. Again subject to meet and confer by the parties and any resulting agreement or evidentiary showing by Defendants, the Court GRANTS SinCo’s narrowed motion.

D. SinCo’s Motion to Seal Documents Supporting Its Motion for Leave to Amend

Finally, in a motion filed on September 1, 2021, SinCo moves to seal documents supporting its motion for leave to amend, namely, the unredacted versions of its memorandum of points and authorities and of exhibits to the supporting Declaration of Daniel A. Gaitan (which are mostly discovery materials, and which are immaterial to the Court’s disposition of that motion above). SinCo submits that the information at issue reflects the names of its customers, which it has agreed to keep confidential, and associated information, insofar as “not previously revealed in documents filed by XingKe or otherwise made a part of the public record herein.)” SinCo has filed redacted public versions of the documents at issue.

SinCo’s motion is GRANTED, again subject to any further developments regarding Defendants’ overbreadth argument. Much of the material at issue in this motion is not subject to rule 2.550 because it reflects discovery materials not submitted as a basis for adjudication. As to the remaining material, the Court finds that the factors established by rule 2.550(d) are satisfied.

The Court will prepare the order.

***

LAW AND MOTION HEARING PROCEDURES

The Court rescinded, effective June 21, 2021, all prior general orders restricting courthouse access.  Remote appearances for complex civil matters are still permitted, but are no longer mandatory.  (See General Order Rescinding Portion of May 6, 2020 General Order Concerning Complex Civil Actions, available at

RescindingPortionof050621GeneralOrderConcerningComplexCivilActions.pdf.)  If a party gives notice that a tentative ruling will be contested, any party seeking to participate in the hearing remotely should contact CourtCall.

Public access to hearings is available on a listen-only line by calling 888-808-6929 (access code 2752612).

State and local rules prohibit recording of court proceedings without a court order.  These rules apply while in court and also while participating in a hearing remotely or listening in on a public access line.  No court order has been issued which would allow recording of any portion of this motion calendar.

The court does not provide court reporters for proceedings in the complex civil litigation departments.  Any party wishing to retain a court reporter to report a hearing may do so in compliance with this Court’s October 13, 2020 Policy Regarding Privately Retained Court Reporters.  The court reporter may participate remotely and need not be present in the courtroom.  

The court does not provide court reporters for proceedings in the complex civil litigation departments.  Any party wishing to retain a court reporter to report a hearing may do so in compliance with this Court’s October 13, 2020 Policy Regarding Privately Retained Court Reporters.  The court reporter may participate remotely and need not be present in the courtroom.  

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[1] Plaintiff argues that the Court should have held a hearing on the motion for reconsideration. But Plaintiff did not request oral argument when the Court stated in its July 29, 2021 order that it would “likely” not hold a hearing. The Court provided the parties with notice and directed and considered supplemental briefing, providing them “a reasonable opportunity to litigate the question.” (Le Francois v. Goel (2005) 35 Cal.4th 1094, 1097.) In any event, the ultimate issue here and on appeal is whether the Court’s Order was substantively correct. (See Paramount Petroleum Corp. v. Superior Court (2014) 227 Cal.App.4th 226, 238.)

[2] The Court also certified two subclasses: a) investors who purchased Ultratech shares before the issuance of the Registration Statement and later exchanged them for Veeco shares, pursuant to the registration statement and prospectus issued in connection with Veeco’s May 26, 2017 merger with Ultratech; and b) investors who purchased Ultratech shares after the issuance of the Registration Statement and later exchanged them for Veeco shares, pursuant to the registration statement and prospectus issued in connection with Veeco’s May 26, 2017 merger with Ultratech.

[3] Based on their declarations, it appears that Plaintiffs will request a total of $18,800 in incentive awards: $9,800 to Construction Workers Pension Trust Fund and $9,000 to Iron Workers Pension Fund.

[4] In re Rite Aid Corp. Securities Litigation (3d Cir. 2005) 396 F.3d 294 cited three studies that found average attorney fee awards were lower in this context (See id. at p. 303 [“one study of securities class action settlements over $10 million . . . found an average percentage fee recovery of 31%; a second study by the Federal Judicial Center of all class actions resolved or settled over a four-year period . . . found a median percentage recovery range of 27-30%; and a third study of class action settlements between $100 million and $200 million . . . found recoveries in the 25-30% range were ‘fairly standard’ ”], citations omitted.) Similarly, In re Immune Response Sec. Litig. (S.D.Cal. 2007) 497 F.Supp.2d 1166 explained that reviewing “data compiled from the mid-1970’s to 2002 …, the Northern District of California found that for securities class action cases in the gross recovery range of $10 to $20 million, the range of the percentage of the award devoted to attorneys’ fees was 7.6% to 55.6% with a mean of 29.5%.” (Id. at p. 1176, citing In Re HPL Techs., Inc. Sec. Litig. (N.D. Cal. 2005) 366 F. Supp. 2d 912, 918.)

[5] All future references are to this statute unless otherwise stated.

[6] The Court (Judge Kulkarni) notes that while it theoretically may be eligible to receive a settlement payment, it did not submit a claim. Therefore, the Court believes it has no disqualifying conflict, and therefore will rule on Plaintiff’s motions.

[7] In Lealao, “class counsel requested 24 percent of $ 7.35 million, or $ 1.76 million,” urging the court “to reach this result by adjusting the lodestar figure ($425,000) upward to $ 1,487,500 by a multiplier of 3.5 ‘based among other things on the result obtained by counsel as shown by actual payments to be made to the class.’ ” (Lealao, supra, 82 Cal.App.4th at p. 25.)

[8] Laffitte declined to address “whether or how the use of a percentage method may be applied” to such a fund. (Laffitte, supra, 1 Cal.5th at p. 503.)

[9] While not entirely clear from Plaintiff’s memorandum, her expert explains that “[d]uring the [settlement] period, the City collected $2,878,671 from its UUT. The Settlement Fund represents 44 percent of the UUT collected. Less attorneys’ fees and costs, the remaining portion of the Settlement Fund represents approximately 30 percent of the UUT collected during that time period.”

[10] Notably, class certification was granted based on class members’ ability to self-identify and prove their damages using their own billing records, since the evidence did not establish that class members could be reasonably identified by the carriers themselves or that damages could necessarily be calculated using carriers’ databases.

[11] SinCo cites Code of Civil Procedure section 426.50 and related authority to support its motion, but that section governs compulsory cross-complaints, and so does not apply here.

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