NATURE OF PROCEEDINGS: Hearing on Plaintiffs’ Motion for Approval of PAGA Settlement

 

Plaintiffs’ Motion for Approval of PAGA Settlement is granted.

 

BACKGROUND

Plaintiffs Ingrird M. Garcia Perez and Bobbie Dianne Taylor filed this action against Foundation Property Management Inc. Mayflower Gardens Health Facilities, Inc., Retirement Housing Fundation, and Hill RHF Housing Partners, LP (Defendants), alleging they failed to pay Plaintiffs and other aggrieved employees the proper amount of straight time and overtime wages, pay minimum wage, provide aggrieved employees with meal periods, provide required rest breaks or compensation, reimburse expenses, properly maintain and submit accurate wage statements, and immediately compensate employees upon termination.

 

Plaintiffs filed a Motion for Approval of PAGA Settlement.

 

LEGAL STANDARD

Labor Code § 2699, subdivision (s)(2) states: “The superior court shall review and approve any settlement of any civil action filed pursuant to this part [Labor Code Private Attorneys General Act of 2004 (PAGA)]. The proposed settlement shall be submitted to the [Labor and Workforce Development Agency (LWDA)] at the same time that it is submitted to the court.” Lab. Code § 2699, subd. (1)(2). With respect to PAGA settlement agreements, penalties recovered by aggrieved employees must be distributed as follows: 75 percent to the LWDA and 25 percent to the aggrieved employees. Lab. Code § 2699, subd. (i). A prevailing employee is entitled to an award of reasonable attorney’s fees and costs incurred in the action. Lab. Code § 2699, subd. (g)(1).

“[N]either the California legislature, nor the California Supreme Court, nor the California Courts of Appeal, nor the [LWDA] has provided any definitive answer as to what the appropriate standard is for approval of a PAGA settlement.” Haralson v. U.S. Aviation Services Corp. (N.D. Cal. 2019) 383 F.Supp.3d 959, 971. However, our Supreme Court has held that a PAGA claim is a form of a qui tam action. Iskanian v. CLS Transportation Los Angeles LLC (2014) 59 Cal.4th 348, 382. Thus, the Court looks to the standards in evaluating a qui tam settlement in evaluating this settlement, i.e., that the settlement is “fair, adequate, and reasonable.” Cf. Cal. Govt. Code § 12652, subd. (e)(2)(B) (In a qui tam action, “[t]he state or political subdivision may settle the action with the defendant notwithstanding the objections of the qui tam Plaintiff if the court determines, after a hearing providing the qui tam Plaintiff an opportunity to present evidence, that the proposed settlement is fair, adequate, and reasonable under all of the circumstances.”)

Similarly, in class action settlements, the trial court must determine that the settlement is fair, reasonable, and adequate to all concerned. Reed v. United Teachers Los Angeles (2012) 208 Cal.App.4th 332, 337. “[T]there is a presumption of fairness when (1) the settlement is reached through arm’s-length bargaining; (2) investigation and discovery are sufficient to allow counsel and the trial court to act intelligently; (3) counsel is experienced in similar litigation; and (4) the percentage of objectors is small.” Ibid. While PAGA actions are distinct from class actions because they share the same “fair, adequate, and reasonable” standard, the presumption of fairness is similarly applicable to PAGA settlements.

ANALYSIS

I. Notice to LWDA

Plaintiffs provide the declaration of Sepideh Ardestami, Taylor’s attorney, stating “Plaintiffs timely served the LWDA with the Settlement Agreement and this Motion, and notified the LWDA of this approval hearing, as reflected in Exhibit 4 hereto and the proof of service.” Ardestami Decl. ¶ 27, Ex. 4; Proof of Service at p. 2.

The Court finds that the notice requirement is met.

II. Reasonableness of Settlement

The settlement provides for Defendants to pay a total of $760,000 (Gross Settlement Amount) to be allocated as follows:

·         Attorneys’ Fees and Costs: $253,333.33 for attorneys’ fees paid to Plaintiffs’ Counsel and $22,922.02 for reimbursement of costs.

·         Service Award to Plaintiffs: Up to $5,000 each will be awarded to Plaintiffs for their service on behalf of the LWDA and the Aggrieved Employees.

·         Settlement Administration Costs: $4,000 to Simpluris Class Action Administration for administering the settlement.

·         PAGA Penalties Fund: Out of the remaining $469,744.65, seventy-five percent (75%) ($352,308.49) will be paid to the LWDA, and the remaining twenty-five percent (25%) ($117,436.16) will be distributed to all Aggrieved Employees. The individual payments to Aggrieved Employees will be calculated based on the proportion of pay periods worked by each Aggrieved Employee during the PAGA Period ( September 17, 2021, to April 7, 2024) relative to the total number of pay periods worked by all Aggrieved Employees during the same period.

A. Presumption of fairness.

“[The attorneys of] Crosner Legal are experienced class and representative action litigators, and have achieved several approved PAGA settlements.” Ardestami Decl. ¶ 31. Zach Crosner has approximately thirteen years of experience as a practicing attorney, and his practice has focused on litigation of wage & hour, consumer, and privacy class action and representative action claims. Ardestami Decl. ¶ 33. Ardestami has 11 years of experience handling employment, wage, hours class actions, and PAGA lawsuits exclusively. Ardestami Decl. ¶ 32.

The parties engaged in a full-day mediation with Jeffrey Krivis, Esq., “a well-respected neutral with extensive wage and hour experience.” Ardestami Decl. ¶ 8. Before the mediation, the Defendants provided the Plaintiffs with sufficient information to adequately evaluate Defendants’ liability exposure for civil penalties to the Aggrieved Employees. Ardestami Decl. ¶ 7 This included the number of potential Aggrieved Employees, the number of aggregate pay periods, pay stubs and time records for a sampling of the allegedly Aggrieved Employees, employee handbooks and manuals, and other relevant policy documents regarding Defendants’ timekeeping and reporting policies. Ibid. Plaintiff’s Counsel states that they reached the agreement “[a]fter a contentious full day of negotiations.” Ardestami Decl. ¶ 8.

The Court finds that, based on this evidence, the investigation of the PAGA claims is adequate to entitle the settlement to a presumption of fairness.

B. Settlement Amount

In this case, Plaintiffs seek PAGA penalties only. The sole PAGA claims at issue in this settlement concern Defendant’s failure to (1) pay all wages owed (rounding); (2) provide duty-free meal periods; (3) authorize and permit duty-free rest periods; (4) reimburse for required use of personal cell phones; (5) provide suitable seating for breaks; (6) pay all wages due upon termination; and (7) properly maintain and submit accurate itemized wage statements.

Plaintiffs estimated Defendants’ maximum liability as approximately $14,724,500. This calculation assumed that penalties could be “stacked” for multiple violations per pay period. This estimate is broken down by claim as follows:

• Unpaid Wage Claims: $1,166,800 (40,234 pay periods *29% violation rate *100 per violation)
• Meal Period Claims: $1,408,200 (40,234 pay periods * 35% violation rate * $100 per violation)
• Rest Break Claims: $1,408,200 (40,234 pay periods * 35% violation rate * $100 per violation)
• Unreimbursed Expenses: $4,023,400 (40,234 * 100% violation rate * $100 per violation)
• Suitable Seating $4,023,400 (40,234 pay periods * 100% violation rate * $100 per violation)
• Inaccurate Wage Statement Claim: $2,575,000 (40,234 pay periods * 64% violation rate * $100 per violation = $2,575,000
• Waiting Time Penalties Claim: $119,500 (1,195 violations * $100 per violation)

 

Defendants argued that there are no unpaid wages, because they round in a neutral manner that does not favor the employees or the employer. They contend company policy strictly prohibits off-the-clock work. Additionally, Defendants argued that any trial would be unmanageable on a representative basis because it would depend on individualized inquiries as to each employee regarding any discrepancies in actual time work versus what was reported and paid. Ardestami Decl. ¶ 19.

 

Defendants argued that written company policy complies with meal and rest break requirements, and employees received their breaks. Ardestami Decl. ¶ 20. Defendants further argued that any failure to provide breaks was an aberrational violation of company policy that would require significant individual inquiries to determine. Ibid. Moreover, as Defendants were not required to maintain a record of rest periods, it would be hard to prove liability. Ardestami Decl. ¶ 21.

 

Defendants denied requiring employees to use their phones for work, and that if they did so, it was purely for convenience. Defendants also argued that they provided seating at all facilities. Ardestami Decl. ¶ 22.

 

The waiting time penalties and wage statements claims are derivative of the unpaid wage and meal/rest claims. Ardestami Decl. ¶ 23.

 

Finally, Defendants contended that a substantial discount should be applied to the stacked civil penalties for repeated violations and that courts have a wide latitude to reduce the amount of civil penalties. Ardestami Decl. ¶¶ 23-24.

 

Based on the defenses raised by Defendants, Plaintiff’s counsel argues that it was unlikely that Plaintiffs would have won both maximum liability and maximum penalty on all claims. Ardestami Decl. ¶ 26. Therefore, Plaintiffs believe that the proposed settlement is reasonable. Mot. at p. 9:20-25.

 

The Court finds that Plaintiffs have offered sufficient evidence of the relative strength of the claims and the range of possible settlement values and concludes that the settlement amount is fair, just, and reasonable.

 

C. Attorney’s Fees and Costs

 

Plaintiffs’ counsel request $253,333.33 in attorney’s fees, reflecting one-third of the gross settlement. In common fund cases, the Court may employ a percentage of the benefit method and may, in its discretion, cross-check the requested percentage against the lodestar. See Laffitte v. Robert Half Int’l, Inc. (2016) 1 Cal.5th 480, 503.

 

Plaintiffs’ counsel worked 282.67 hours at rates between $600 and $800 per hour. Under the lodestar approach, this would total $205,248.00. Mot. at p. 13:15-16. The lodestar cross-check shows an implied multiplier of approximately 1.234. The Court finds the requested attorney’s fees reasonable. Likewise, the Court finds reasonable the requested $22,922.02 in costs.

 

D. Settlement Administrator

 

The Settlement Agreement allocates $4,500 in administrator expenses, subject to increase by a showing of good cause and court approval. Ardestami Decl. ¶ 10, Ex. 1, p. 5. However, the motion seeks only $4,000 to be paid to Simpluris Class Action Administration, which has offered a discount. Motion at p. 3:14-15; Islas Decl. ¶ 9. The Court finds this amount reasonable.

 

E. Service Award and General Release Payment

 

“[T]he rationale for making enhancement or incentive awards to named plaintiffs is that they should be compensated for the expense or risk they have incurred in conferring a benefit on other members of the class.” Clark v. American Residential Services LLC (2009) 175 Cal.App.4th 785, 806 (Clark). “‘Since without a named Plaintiff there can be no class action, such compensation as may be necessary to induce him to participate in the suit could be thought the equivalent of the lawyers’ nonlegal but essential case-specific expenses, such as long-distance phone calls, which are reimbursable.’” Id. at p. 804 (quoting In re Continental Illinois Sec. Litigation (7th Cir. 1992) 962 F.2d 566, 571). While incentive payments are a common feature of class action procedures, PAGA is silent on incentive payments for the named plaintiffs. Considering the similarities between Class actions and PAGA actions, the Court concludes that incentive payments to PAGA plaintiffs are warranted and promote the legislature’s goals in enacting PAGA. However, the Court notes that, unlike Class Action Procedures, PAGA actions do not guarantee an opportunity for aggrieved employees to object to proposed settlements. See Turrieta v. Lyft, Inc. (2024) 16 Cal.5th 664, 713, fn. 30 (“‘PAGA does not provide that aggrieved employees must be heard on the approval of PAGA settlements’ and ‘we will not read a requirement into a statute that does not appear therein.’” [Quoting Moniz v. Adecco USA, Inc. (2021) 72 Cal.App.5th 56, 79]). Therefore, the Court scrutinizes service awards more closely in PAGA cases.

 

The Court is persuaded by the analysis in an unpublished federal court case in which the court examined an incentive award of $5,000 in a PAGA case and found it reasonable. Ambrose v. US Med-Equip, LLC, 2024 WL 307843, at *10 (E.D. Cal. Jan. 26, 2024). While not binding, this Court finds persuasive the Ambrose court’s conclusion that an award of $5,000 is fair and reasonable considering the relatively small amount of the award coupled with the Plaintiffs’ general release of their individual claims.

 

CONCLUSION

Plaintiffs’ Motion for Approval of PAGA Settlement is granted.