Judge Alison Mackenzie, Case Number: 23STCV12946, Date: 2025-01-14 Tentative Ruling

Judge: Alison Mackenzie, Case: 23STCV12946, Date: 2025-01-14 Tentative Ruling

Case Number: 23STCV12946 Hearing Date: January 14, 2025 Dept: 55

NATURE OF PROCEEDINGS: Hearing on Plaintiff's Motion for Order to Approve PAGA Settlement

Plaintiff's Motion for Order to Approve PAGA Settlement is granted.

BACKGROUND

Plaintiff Shareeka Norris filed this PAGA action against CG Hospitality Group, Inc. (Defendant), and Doe defendants 1-100, alleging they failed to pay Plaintiff and other aggrieved employees the proper amount of straight time and overtime wages, 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.

Plaintiff filed a Motion for Order to Approve PAGA Settlement.

LEGAL STANDARD

Labor Code § 2699(l)(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 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 the context of 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 equally applicable to PAGA settlements.

ANALYSIS

I. Procedural Requirements

The Court finds that all procedural requirements are met.

Plaintiff filed a proof of service showing that she served the following documents on Defendant and LWDA: 1. Plaintiff’s Notice of Motion and Motion for Approval of Private Attorneys General Act Settlement Agreement, For Attorneys’ Fees and Costs and Administrative Fees; Memorandum of Points and Authorities in Support Thereof 2. Declaration of Shareeka Norris in Support of Motion to Approve PAGA Settlement 3. Declaration of Aaron A. Bartz in Support of Motion to Approve PAGA Settlement 4. Declaration of Jonathan Paul in Support of Motion to Approve PAGA Settlement 5. Declaration of Walter L. Haines in Support of Motion to Approve PAGA Settlement 6. [Proposed] Order and Judgement. Plaintiff likewise filed the above documents in support of her motion.

II. Reasonableness of Settlement

The settlement provides for Defendant to pay a total of $ 173,000 of which $88,300 is to be paid in PAGA penalties, $57,900 to Plaintiff’s counsel for attorney fees, $16,00 to counsel for expenses, $6,500 to the settlement administrator, and $5,000 to Plaintiff as the “Aggrieved Employee Representative. Motion at p. 2; Bartz Decl., Ex. A at ¶ 3.2.3.

1. Presumption of fairness.

The Court finds that the settlement agreement is entitled to a presumption of fairness.

The parties arrived at the settlement agreement through arm’s-length bargaining. Bartz Decl., ¶ 10. Plaintiff propounded discovery, and during the meet and confer efforts, Defendant informally produced a representative sampling of time and payroll records for aggrieved employees Decl., ¶ 10,. Plaintiff’s counsel has twenty-seven years of experience practicing law, the last ten of which focused on complex employment law and wage and hour matter, serving as class counsel in several cases. Id. ¶ 13. Counsel testifies that “the negotiations were non-collusive and involved considerable disputes over payment terms.” Ibid. The Court finds that, based on this evidence, the investigation of the PAGA claims is adequate to show a presumption of fairness.

2. Settlement amount

In this case, Plaintiff seeks PAGA penalties only. The sole PAGA claim that is at issue in this settlement concerns Defendant’s failure to: (1) pay all wages owed; (2) provide duty-free meal periods; (3) authorize and permit duty-free rest periods; (4) pay all wages due upon termination; and (5) properly maintain and submit accurate itemized wage statements. Bartz Decl., ¶ 17.

Plaintiff calculates Defendant’s maximum potential liability to be $2,583,343.00. That figure breaks down as follows:

(a) Unpaid wages: $868,500

(b) Meal breaks: $780,543

(d) Failure to pay wages on termination: $65,800

(e) Improper pay stubs: $1,737, 000.

While the maximum potential liability figure is considerably larger than is provided for in the settlement, Plaintiff also provided information suggesting the settlement is reasonable based on the strengths and weaknesses of Plaintiff's suit. Bartz Decl., ¶ 17. Plaintiff asserts there was a low probability of prevailing on these fact specific claims, and significant risks that the court would exercise its discretion to reduce the penalties under Carrington v. Starbucks Corp. (2018) 30 Cal.App.5th 504. Assuming a 10% chance of prevailing on each claim, and a 30% penalty reduction, Plaintiff estimates that Defendant’s actual PAGA exposure is much lower and estimates it to be $297,818. Id. at ¶ 17. The settlement amount reflects approximately 58% of that revised liability estimate. Plaintiff believes this to be a good result because Defendant has potentially meritorious defenses and there is a question as to whether a trial court will award cumulative penalties for potential overlap and double count similar violations. Ibid. The Court finds that Plaintiff has offered sufficient evidence to determine the relative strength of the claims and the range of possible settlement values.

3. Attorney’s Fees

Class Counsel requests $57,900 in attorney 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.

Plaintiff’s counsel worked approximately 76 hours, at hourly rates between $850 and $650. Under the lodestar approach, this would total $66,295. The lodestar cross-check shows an implied negative multiplier of approximately .87. The Court finds the requested Attorney’s Fees reasonable.

4. Settlement Administrator

The proposed settlement allocates up to $6,500 to Xpand Legal Consulting LLC (Xpand) for administering the settlement. In support of the settlement, Plaintiff provides the declaration of Jonathan Paul, CEO of Xpand. Based on the extensive experience Xpand has in class action settlements, the Court finds that Plaintiff has justified the allotment. Paul Decl. ¶ 2.

5. Aggrieved Employee Representative

The proposed settlement allocates $5,000 to Plaintiff as the “Aggrieved Employee Representative.” While incentive payments are a common feature of class action procedures, PAGA is silent on incentive payments for the named plaintiffs. Moreover, PAGA’s requirement that 25 percent of recovered penalties “shall be” distributed to “the aggrieved employees” offers no suggestion that any employee should receive more than his or her pro rata share. Lab. Code § 2699(i). PAGA civil penalties “must be distributed to all aggrieved employees,” rather than solely to the aggrieved employee who brings the PAGA action. Moorer v. Noble L.A. Events, Inc. (2019) 32 Cal.App.5th 736, 741-742. The Moorer court noted that allocating 25 percent to all aggrieved employees “is consistent with the statutory scheme under which the judgment binds all aggrieved parties, including nonparties” and that a PAGA action “is fundamentally a law enforcement action designed to protect the public and not benefit private parties.” Id. at pp. 742-743 (quoting Iskanian, 59 Cal.4th at p. 381). Nor can the Court uphold the release as a valid settlement of Plaintiff’s individual wage claims, as the text of the agreement makes clear it is compensation for her work as a representative and there is no evidence that Plaintiff’s individual damages merit that amount. Accordingly, the Court reduces the Aggrieved Employee Representative payment from $5,000 to $0.00 and under the terms of the settlement, those funds “become part of Net Settlement Amount for distribution to participating Aggrieved Employees.” Bartz Decl. Ex. A at ¶ 3.2.3.

CONCLUSION

Plaintiff's Motion for Order to Approve PAGA Settlement is granted.