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[Pages:27]Case 3:17-cv-03763-JSC Document 56 Filed 07/08/19 Page 1 of 27

United States District Court Northern District of California

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UNITED STATES DISTRICT COURT

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NORTHERN DISTRICT OF CALIFORNIA

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BRIAN WILSON, et al.,

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Plaintiffs,

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v.

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TESLA, INC., et al.,

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Defendants.

Case No.17-cv-03763-JSC

ORDER RE: MOTION FOR FINAL APPROVAL OF CLASS ACTION SETTLEMENT AND ATTORNEYS' FEES

Re: Dkt. Nos. 47 & 51

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Plaintiffs Brian Wilson, Carrie Hughes, and Katia Segal filed this wage and hour action

16 against their employer, Tesla, Inc. and Tesla Motors, Inc. (collectively "Tesla"). Plaintiffs allege

17 that Tesla misclassified them as exempt employees and failed to provide them overtime, rest and

18 meal breaks, wage statements, and final wages. Plaintiffs' motion for final approval of their class

19 action settlement agreement and motion for attorneys' fees, costs, and an incentive award is now 20 pending before the Court.1 (Dkt. No. 47 & 51.) After reviewing the briefs and relevant legal

21 authority and with the benefit of oral argument on April 4, 2019 the Court GRANTS the motion

22 for final approval and GRANTS in part the motion for attorneys' fees, costs, and an incentive

23 award.

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BACKGROUND

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Tesla is an automaker and technology and design company that focuses on energy

26 innovation. (Second Amended Complaint ("SAC") at ? 7.) Telsa does not sell its vehicles at

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1 All parties have consented to the jurisdiction of a magistrate judge pursuant to 28 U.S.C. ? 636(c). (Dkt. Nos. 6 & 9.)

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1 dealerships, but instead uses a "factory-direct sales system with non-negotiable pricing," although

2 it does have showrooms where a few cars are available for test drives and purchase. (Id.)

3 Plaintiffs Brian Wilson, Carrie Hughes, and Katia Segal are or were employed by Tesla as Owner

4 Advisors showing and selling cars in Tesla's showrooms. (Dkt. No. 47-3 at ? 3.) Until January

5 2018, Tesla classified its Owner Advisors as exempt under the commissioned salesperson

6 exemption and compensated them by paying a salary as well as bonuses and commissions. (Id.)

7 Plaintiffs contend that they were misclassified as exempt employees and thus denied proper meal

8 and rest breaks as well as overtime pay. (Id.)

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THE SETTLEMENT

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A. General Terms

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The Settlement Agreement establishes a common fund of $1,059,851.40 inclusive of

12 attorneys' fees, costs and expenses, incentive payments to the named Plaintiffs, payment to the

13 Labor Workforce Development Agency ("LWDA"), employee-owed taxes, and administration

14 costs including settlement administration fees.2 (Dkt. No. 51-3; Dkt. No. 51-2 at ? 3-4.) Under

15 the Settlement Agreement, the common fund shall be allocated in the following manner:

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(1) attorney's fees up to one-third of the fund ($333,333),

(2) actual litigation costs of up to $20,000, 17

(3) an incentive award for the named Plaintiffs of $10,000 each, 18

(4) claims administration expenses up to $15,000, and 19

(5) a $50,000 PAGA penalty, $37,500 of which shall be paid to the California

20 Labor & Workforce Development Agency, and the remaining $12,500 shall be

21 included in the net distribution to the class.

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2 The Settlement Agreement actually called for a common fund of $1,000,000; however, this amount also included Tesla's share of taxes, which, at preliminary approval, the Court noted

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should not be included in the actual settlement amount. The Court thus preliminarily approved a settlement amount of $986,000, which excluded the $14,000 set-aside for Tesla's share of the

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taxes. (Dkt. No. 33.) Following preliminary approval, Tesla produced class data reflecting more workweeks than identified in the Settlement Agreement, triggering the escalator clause in the

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Settlement Agreement raising the settlement amount to $1,026,755. (Dkt. No. 51-2 at ? 3.) After the distribution of class notice, Tesla determined that additional workweeks should have been

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included in the class data, which again triggered the escalator clause to increase the total settlement amount to $1,059,851.40. (Id. at ? 4.).

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United States District Court Northern District of California

1 (Dkt. No. 51-3 at ? 55; Dkt. No. 51-4 at ? 16.) Following these disbursements, the remaining

2 funds are distributed to the class members based on the number of workweeks worked. (Dkt. No.

3 51-3 at ? 55(a).) Class members will have 180 days to cash their settlement checks. Any residue

4 from the uncashed checks shall be paid by the Settlement Administrator to California's State

5 Controller's Office for Unclaimed Property in the name of the class member.3 No settlement

6 funds will revert to Tesla.

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B. Class Members

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The class is comprised of all employees of Tesla who worked in California from June 29,

9 2013 through January 28, 2018 as an owner advisor, sales advisor, or another similar exempt sales

10 position. (Dkt. No. 51-3 at ? 5.) There are 282 class members. Because this is not a claims made

11 settlement (that is, class members do not need to submit a claim form to participate), and no class

12 members have opted out of the settlement, all 282 class members will receive a pro rata share of

13 the settlement.

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C. Notice

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On November 2, 2018, ILYM Group, the Settlement Administrator, received the class data

16 file from Tesla, which contained the name, social security number, last known mailing address,

17 and total number of workweeks for each settlement class member. (Dkt. No. 51-4 at ? 5.) The list

18 contained 282 individuals (the "Class List"). (Id.) The Class List was then processed against the

19 National Change of Address ("NCOA") database, maintained by the United States Postal Service

20 ("USPS"), for purposes of updating and confirming the mailing addresses of the class members

21 before mailing of the Notice Packet. (Id. at ? 6.)

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On January 11, 2019, the ILYM Group mailed the Notice Packet via U.S First Class Mail,

23 to all 282 individuals contained in the Class List. (Id. at ? 7.) Of these, 16 were returned as

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3 Under the Settlement Agreement this amount was to be paid to the California Industrial Relations Unclaimed Wages Fund in the name of the class member, but the California Department

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of Industrial Relations has since "announced it will no longer accept checks arising from private litigation in which the Labor Commissioner was not involved and that the California State

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Controller's Office's Unclaimed Property Division will handle all unclaimed funds. In compliance with that announcement, all uncashed settlement checks will be deposited in the class members'

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name with California's State Controller's Office for Unclaimed Property." (Dkt. No. 51-1 at 9:2125.)

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United States District Court Northern District of California

1 undeliverable. The ILYM Group performed a computerized skip trace on the 16 returned Notice

2 Packets that did not have a forwarding address, in an effort to obtain an updated address for

3 purpose of re-mailing the Notice Packet. (Id. at ?? 10-11.) As a result of this skip trace, 10

4 updated addresses were obtained and the Notice Packet was promptly re-mailed to those class

5 members, via U.S First Class Mail. (Id.) For the remaining 6, no further address information was

6 found. (Id. at ? 12.)

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The Notice Packet advised class members of the applicable deadlines and the date of the

8 final approval hearing, as well as how members could obtain additional information about the

9 settlement. (Dkt. No. 51-4, Ex. A.) Class members were provided an ILYM Group toll-free

10 number as well as an email address to make inquiries about the settlement. (Id. at 12.) Class

11 counsel also created a website regarding the settlement where it made available Plaintiffs' motion

12 for attorneys' fees and costs as well as other pleadings from this action. (Id. at 16.)

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On February 11, 2019, the ILYM Group mailed a reminder postcard, via U.S. First Class

14 Mail, to the class members. (Dkt. No. 51-4 at ? 8.) The postcard served as a reminder to the class

15 members of the deadline date to submit a request for exclusion, along with how to contact the

16 ILYM Group for more information on the Settlement.

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As of March 20, 2019, ILYM Group had not received any requests for exclusion or to opt-

18 out. (Id. at ?? 13-14.) The deadline to request exclusion or to opt-out from the Settlement was

19 March 12, 2019. (Id.)

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D. Release

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The scope of the general class release is:

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Any and all claims, actions, demands, causes of action, suits, debts,

obligations, damages, rights or liabilities, of any nature and

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description whatsoever, know or unknown that have been, could have

been, or might in the future be asserted by Plaintiffs, or the Class

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Members or their respective heirs, executors, administrators,

beneficiaries, predecessors, successors, attorneys, assigns, agents

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and/or representatives arising out of any claims that were or could

have been encompassed in this Action, and any facts which

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reasonably flow from the facts alleged in Plaintiffs' Complaints.

27 (Dkt. No. 51-3 at ? 35.) The named Plaintiffs have a broader release, releasing any claims under

28 California Civil Code section 1542 as well as the above claims. (Id. at ? 36.) 4

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United States District Court Northern District of California

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E. Payments

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Within seven days of the Settlement Agreement's effective date, Tesla shall wire the

3 settlement administrator the entire common fund amount of $1,059,851.40. (Id. at ? 54.) After

4 deducting the fees award, costs award, incentive award, payment to LWDA, and administration

5 fees, the remaining amount (the "Net Settlement Amount") will be disbursed to the class

6 members. (Id. at ?? 24; 55.a.i.). The settlement administrator shall disburse the individual

7 settlement awards to the class members within 14 days by sending them a check to their last

8 known addresses. (Id. at ? 55.a.) The size of each individual settlement award is based on pro rata

9 shares calculated based on the number of weeks each class member worked compared to the

10 number of weeks worked by all class members. (Id. at ? 11.)

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The individual settlement awards shall be allocated as follows: one-third as wages subject

12 to all applicable tax withholdings, one-third as non-wage penalties not subject to payroll tax

13 withholdings, and one-third as non-wage interest not subject to payroll tax withholdings. (Id. at ?

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PROCEDURAL BACKGROUND

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Plaintiff Brian Wilson filed this action in June 2017 asserting seven claims for relief: (1)

17 failure to pay overtime wages in violation of the FLSA; (2) failure to pay minimum wage in

18 violation of California Labor Code section 1194; (3) failure to pay overtime in violation of

19 California Labor Code sections 519 & 1194; (4) failure to provide meal breaks in violation of

20 California Labor Code section 226.7 and IWC Order No. 4-2001; (5) failure to provide rest breaks

21 in violation of California Labor Code section 226.7 and IWC Order No. 4-2001; (6) failure to

22 provide proper wage statements in violation of California Labor Code section 226(a); and (7)

23 unlawful business practices in violation of California Business & Professions Code section 17200

24 et seq. (Dkt. No. 1.) Prior to Tesla's appearance, Plaintiff amended the complaint to add Plaintiff

25 Hughes and add a claim for failure to pay final wages in violation of California Labor Code

26 sections 201 and 202. (Dkt. No. 10.)

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The parties engaged in an early mediation in November 2017 and were able to resolve the

28 dispute with the terms finalized in May 2018. (Dkt. No. 22-1 at ? 13.) On the same day Plaintiffs 5

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1 filed their motion for preliminary approval, they filed a second amended complaint adding

2 Plaintiff Segal, adding a PAGA claim, and withdrawing the FLSA claim. (Dkt. No. 21.) The

3 Court denied the motion for preliminary approval based on numerous issues with the notice and

4 settlement. (Dkt. Nos. 24, 30.) Plaintiffs then filed a renewed motion for preliminary approval.

5 (Dkt. No. 29.) The Court held a hearing on August 30, 2018 and raised additional concerns

6 regarding notice and ordered Plaintiffs to file a new notice by September 13, 2018. (Dkt. No. 31.)

7 Plaintiffs addressed the Court's concern and the Court granted the renewed motion for preliminary

8 approval on September 26, 2018. (Dkt. No. 33.) When Plaintiffs failed to file their motion for

9 attorneys' fees and costs by the deadline set out in the Court's Order and failed to otherwise

10 comply with portions of the Court's Order, the Court ordered Plaintiff to file a status report. (Dkt.

11 No. 36.) The Court then held a status conference at which the parties apprised the Court of

12 numerous issues which had arisen. (Dkt. No. 42.) In light of these issues, the parties submitted a

13 modified settlement agreement and notice for the Court's approval. (Dkt. No. 43.) The Court

14 granted the stipulation to modify the Settlement Agreement and Notice and set the Final Approval

15 Hearing for April 4, 2019. (Dkt. No. 44.) Plaintiffs filed their attorneys' fees motion on January

16 11, 2019. (Dkt. No. 29.) Additional issues arose requiring yet another status conference and the

17 motion for final approval was finally filed on March 21, 2019. (Dkt. Nos. 50; 51.)

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LEGAL STANDARD

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Judicial policy strongly favors settlement of class actions. Class Plaintiffs v. City of

20 Seattle, 955 F.2d 1268, 1276 (9th Cir. 1992). "To vindicate the settlement of such serious claims,

21 however, judges have the responsibility of ensuring fairness to all members of the class presented

22 for certification." Staton v. Boeing Co., 327 F.3d 938, 952 (9th Cir. 2003). Where the "parties

23 reach a settlement agreement prior to class certification, courts must peruse the proposed

24 compromise to ratify both the propriety of the certification and the fairness of the settlement." Id.

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The approval of a class action settlement takes place in two stages. In the first stage of the

26 approval process, the Court preliminarily approves the settlement pending a fairness hearing,

27 temporarily certifies a settlement class, and authorizes notice to the class. See Villegas v. J.P.

28 Morgan Chase & Co., No. CV 09?00261 SBA (EMC), 2012 WL 5878390, at *5 (N.D. Cal. Nov. 6

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1 21, 2012). "At the [final] fairness hearing, presently before the Court, after notice is given to

2 putative class members, the Court entertains any of their objections to (1) the treatment of the

3 litigation as a class action and/or (2) the terms of the settlement." Ontiveros v. Zamora, 303

4 F.R.D. 356, 363 (E.D. Cal. Oct. 8, 2014) (citing Diaz v. Trust Territory of Pac. Islands, 876 F.2d

5 1401, 1408 (9th Cir. 1989)). Following the final fairness hearing, the Court must reach a final

6 determination as to whether the parties should be allowed to settle the class action pursuant to

7 their agreed upon terms. See id.; Telecommc'ns Coop. v. DIRECTV, Inc., 221 F.R.D. 523, 525

8 (C.D. Cal. 2004).

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DISCUSSION

10 I. Motion for Final Approval

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A. Final Class Certification of the Settlement Class

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Class actions must meet the following requirements for certification: 1) the class is so

13 numerous that joinder of all members is impracticable; 2) there are questions of law or fact

14 common to the class; 3) the claims or defenses of the representative parties are typical of the

15 claims or defenses of the class; and 4) the representative parties will fairly and adequately protect

16 the interests of the class. Fed. R. Civ. P. 23(a).

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In addition to meeting the requirements of Rule 23(a), a potential class must also meet one

18 of the conditions outlined in Rule 23(b)--of relevance here, the condition that "the court finds that

19 the questions of law or fact common to class members predominate over any questions affecting

20 only individual members, and that a class action is superior to other available methods for fairly

21 and efficiently adjudicating the controversy." Fed. R. Civ. P. 23(b)(3). In evaluating the proposed

22 class, "pertinent" matters include:

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(A) the class members' interests in individually controlling the

prosecution or defense of separate actions;

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(B) the extent and nature of any litigation concerning the

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controversy already begun by or against class members;

26 (C) the desirability or undesirability of concentrating the litigation of

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the claims in the particular forum; and

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(D) the likely difficulties in managing a class action.

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1 Fed. R. Civ. P. 23(b)(3).

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1. Rule 23(a) Requirements

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In the Court's Order granting preliminary approval of the settlement, the Court found that

4 the putative class satisfied the numerosity, commonality, typicality, and adequacy of

5 representation requirements of Rule 23(a). (Dkt. No. 33 at 6.) The Court is unaware of any

6 changes that would alter its analysis. Plaintiffs did not indicate in their papers that any such

7 developments had occurred and the Court has not received any communications from Tesla

8 otherwise. Thus, all four of Rule 23(a)'s requirements have been met.

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2. Rule 23(b) Requirements

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In its Order granting preliminary approval of the settlement, the Court found that the

11 prerequisites of Rule 23(b)(3) were likewise satisfied. (Dkt. No. 33 at 6-7.) The Court is unaware

12 of any changes that would alter its analysis, and there was no indication in Plaintiffs' papers or at

13 the fairness hearing that any such developments had occurred. Further, there were no objections by

14 individual class members who claim to have an interest in controlling the prosecution of this

15 action or related actions.

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Accordingly, the Rule 23(b) requirements are met.

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3. Rule 23(c)(2) Notice Requirements

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Finally, if the Court certifies a class under Rule 23(b)(3), it "must direct to class members

19 the best notice that is practicable under the circumstances, including individual notice to all

20 members who can be identified through reasonable effort." Fed. R. Civ. P. 23(c)(2)(B). Rule

21 23(c)(2) governs both the form and content of a proposed notice. See Ravens v. Iftikar, 174 F.R.D.

22 651, 658 (N.D. Cal. Jan 7, 1997) (citation omitted). The notice must be "reasonably certain to

23 inform the absent members of the plaintiff class," but Rule 23 does not require actual notice.

24 Silber v. Mabon, 18 F.3d 1449, 1454 (9th Cir. 1994).

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As the Court found in its preliminary approval order, the notice requirements were met

26 here. The revised notice describes the allegations and claims, included a definition of the class

27 members, had contact information for Plaintiffs' counsel and the settlement administrator, a

28 summary of the settlement amount outlining how the recovery was calculated both generally as 8

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