Merante v. American Institute for Foreign Study, Inc.

Background

Isabella Savini Merante sued American Institute for Foreign Study, Inc. The proposed class and representative claims concerned alleged failures to provide accurate wage statements to au pairs participating in the defendant’s program who resided with California host families. The settlement also resolved claims under California’s Private Attorneys General Act, which allows an individual to seek civil penalties on behalf of the state for alleged Labor Code violations.

The proposed Rule 23 settlement class consisted of current and former au pairs in the defendant’s program who resided with California host families from January 8, 2020, through the date of preliminary approval. The opinion states that the class included approximately 1,349 people. The court found that the proposed class satisfied the requirements for settlement certification, including numerosity, common legal and factual questions, typicality, adequacy of representation, predominance of common questions, and superiority of a class action over more than 1,000 individual claims.

Settlement Terms

The settlement required American Institute for Foreign Study, Inc. to pay a gross settlement amount of $1,000,000. That amount included payments to participating class members; $100,000 for the PAGA settlement, with $75,000 allocated to California’s Labor and Workforce Development Agency and $25,000 distributed among PAGA members; administration costs not exceeding $24,623 if finally approved; litigation costs of $3,000 if finally approved; and a $5,000 service payment to Merante if finally approved. The opinion states that participating Rule 23 class members would receive an average net payment of approximately $457.66.

The settlement also required the defendant to notify California host families that they are responsible for complying with the California Labor Code, including paying au pairs for all hours worked at the applicable state or local minimum wage. Settlement payments would be calculated largely according to members’ workweeks. The settlement administrator would distribute payments through PayPal, with options for a different email address or automated clearinghouse payment.

The court approved Analytics Consulting LLC as settlement administrator. Its duties included administering notice, responding to class-member communications, calculating payments, processing exclusions and objections, distributing funds, and handling related reporting and returned funds.

Notice and Releases

The court found the proposed email notice, followed by text-message notice to people who did not open or receive the email, to be the best notice practicable given the transient nature of the class members. The court required the parties to add the bold, capitalized statement, “YOU MAY BE ENTITLED TO A CASH AWARD,” to the top of the notices. With that change, the court approved the notice plan and the proposed procedures for participation, exclusion, and objections.

The class release covered alleged violations of California Labor Code section 226 concerning inaccurate wage statements and related claims that could have been asserted from the facts and legal theories in the amended complaint. The PAGA release covered the alleged PAGA claims and related PAGA claims that could have been asserted from the facts alleged. The opinion states that a class member who opted out of the class settlement would still be bound by the PAGA release if that person qualified as a PAGA member.

Court’s Analysis

The court concluded that the settlement was fair, adequate, and reasonable for preliminary-approval purposes. It considered the parties’ formal discovery, two settlement conferences, the involvement of experienced counsel, the absence of apparent collusion, the strength and risks of the claims, and the settlement’s monetary and nonmonetary relief.

The court discussed several risks. The defendant disputed that it was an employer of the au pairs and argued that federal Exchange Visitor Program regulations preempted the state-law wage claims. The court also considered the effect of the Supreme Court’s decision in Viking River Cruises, Inc. v. Moriana on Merante’s PAGA claim. Based on the defendant’s representation that Merante had signed an individual arbitration agreement, the court stated that she likely would have been required to arbitrate her individual PAGA claim and might then have lacked the ability to pursue the representative PAGA claim in court. The court also noted uncertainty about the wage-statement claim, including whether the defendant was an employer and whether it could assert a good-faith defense.

The court found that the proposed class recovery of approximately $600,000 represented roughly 15% to 22.2% of the estimated maximum value of the wage-statement claim. It found the $100,000 PAGA allocation reasonable in light of legal uncertainty and the risks of continued litigation, even though that amount represented a small percentage of the estimated maximum PAGA penalties. The court also found that the requested attorney-fee amount of up to 25% of the gross settlement fund, estimated costs of $2,405.51, and proposed $5,000 service payment were within the range of reasonableness for preliminary approval. Final requests for fees, costs, and the service payment remained subject to later motions and the final-approval process.

Order

Judge Edward M. Chen ordered that the settlement class be preliminarily certified; approved the procedures for class members to participate, opt out, and object; appointed Nichols Kaster, LLP, Rukin Hyland & Riggin LLP, and Towards Justice as class counsel; appointed Merante as class representative; preliminarily approved the settlement agreement and its class and PAGA settlements; appointed Analytics Consulting LLC as settlement administrator; and adopted the modified notice plan.

The court required the defendant to provide class-member contact information to the administrator within 20 calendar days after the order. It scheduled a final approval hearing for December 15, 2022, at 3:00 p.m. Pacific Time, where the court would consider final approval, attorney fees and costs, administration expenses, and the class representative service payment. The order disposed of Docket No. 45.