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

BACKGROUND

Plaintiff Christopher Luna Rodriguez filed this action against Classic Beverage of Southern California, LLC (Defendant), alleging they failed to pay Plaintiff 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.

 

Plaintiff filed an unopposed Motion for Order to Approve 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 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 equally applicable to PAGA settlements.

 

ANALYSIS

I. Procedural Requirements

The Court finds that all procedural requirements are met.

Plaintiff provides the declaration of Michael H. Boyamian stating, “Pursuant to California Labor Code Section 2699(l), Plaintiff provided a copy of the Settlement Agreement and this motion to the LWDA concurrently with the filing of the instant motion for settlement approval as set forth in the accompanying proof of service.” Boyamian Decl. at p. 10 ¶ 15. A confirmation email from the LWDA is attached as Exhibit 3 to Boyamian’s declaration. Id. at p. 46.

II. Reasonableness of Settlement

The settlement provides for Defendant to pay a total of $150,000 (Gross Settlement Amount) to be allocated as follows:

·         Attorneys’ Fees and Costs: $50,000 for attorneys’ fees paid to Plaintiff’s Counsel, Boyamian Law, Inc. Additionally, $12,629.31 for reimbursement of costs.

·         Service Award to Plaintiff: Up to $5,000 will be awarded to Plaintiff Christopher Luna Rodriguez for his service on behalf of the LWDA and the Aggrieved Employees.

·         General Release Payment to Plaintiff: $5,000 to Plaintiff Christopher Luna Rodriguez for his release of claims against Defendant and related entities arising from his employment.

·         Settlement Administration Costs: $2,750 to Simpluris Class Action Administration, the Settlement Administrator, for their services in administering the settlement.

·         PAGA Penalties Fund: Out of the remaining $74,620.69, seventy-five percent (75%) ($55,965.512) will be paid to the LWDA, and the remaining twenty-five percent (25%) ($18,655.17) 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 Settlement Period (December 22, 2022, through November 30, 2024) relative to the total number of pay periods worked by all Aggrieved Employees during the same period.

1. Presumption of fairness.

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

The parties engaged in a full-day mediation with the Hon. Carl J. West (Ret.) of JAMS, an experienced wage and hour class and PAGA action mediator. Boyamian Decl. at p. 9 ¶ 12. Before the mediation, the Defendants provided the Plaintiff with sufficient information to properly evaluate Defendants’ liability exposure for civil penalties to the Aggrieved Employees. This included data such as the total number of Aggrieved Employees, pay periods, written wage and hour policies, employee handbooks, and a 25% sample of time and payroll records. Ibid.

Plaintiff’s Counsel explicitly states that the Settlement was reached after extensive arm’s length negotiations and with the assistance of the Mediator. Boyamian Decl. at p. 9 ¶ 13. Similarly, the Settlement Agreement acknowledges that the Parties have arrived at the Settlement after arm’s-length negotiations by experienced counsel. Id. at p. 41, Ex. 2 ¶ 36. Plaintiff’s Counsel engaged in robust discussions with Defendant about the merits of the underlying action following formal written discovery. Id. at p. 9 ¶ 11. Furthermore, Plaintiff’s Counsel testifies “each aspect of the case was vigorously contested by the parties”, including disagreements over the application of PAGA penalties (including stacking) and the strength of the Plaintiff’s claims versus the Defendant’s defenses. Id. at p. 11 ¶¶ 20, 21. 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 claims at issue in this settlement concern 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.

Plaintiff calculates defendants maximum liability, with and without stacking. With stacking, Plaintiff’s Counsel estimated the maximum PAGA liability exposure for Defendant at approximately $1,725,000 ($100 x 6 violations x 2,875 pay periods). Boyamian Decl. at pp. 10-11 ¶ 18. This calculation assumed that penalties could be “stacked” for multiple violations per pay period. Assuming the Court adopted Defendant’s argument against “stacking” penalties, the potential exposure for the sole warehouse in California would be between $143,750 ($50 x 2,875 pay periods) or $287,500 ($100 x 2,875 pay periods), depending on whether Defendant had notice of continuing violations. Id. at p. 11 ¶ 20.

Plaintiff’s Counsel also developed reasonable trial estimates for each category of alleged violation, taking into account the risks of litigation and potential reductions in penalties by the Court. These estimates were:

• Meal & Rest Break Claims: $106,150. Boyamian Decl. at p. 14 ¶ 27. The maximum theoretical value for these claims was $424,600. Id. at p. 12 ¶ 22.
• Minimum and Overtime Wage Claims: $109,920. Id. at p. 15 ¶ 29. The maximum theoretical value was $274,800. Id. at p. 14 ¶ 28.
• Reimbursement for Necessary Business Expenditures Claim: $101,160. Id. at p. 16 ¶ 31. The maximum assessed figure was $252,900. Id. at p. 15 ¶ 31.
• Inaccurate Wage Statement Claim: $60,375. Id. at p. 16 ¶ 24. The maximum theoretical value was $287,500. Id. at p. 16 ¶ 32.
• Waiting Time Penalties Claim: $5,595.50. Id. at p. 16 ¶ 37. The maximum penalty was calculated as $6,200. Id. at p. 17 ¶ 36

 

The total reasonable trial estimate for all claims is $383,200.50. Therefore, the Gross Settlement Amount of $150,000 represents approximately 8% to 52% of Defendant’s maximum potential PAGA exposure (depending on whether penalties were stacked) and approximately 39% of the Plaintiff’s total risk-adjusted trial estimate of $383,200.50. However, Plaintiff emphasizes that the maximum penalty figure was not considered a realistic outcome due to various litigation risks and defenses available to the Defendant. Motion at p 13:20-15:9. The Court finds that Plaintiff has 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.

3. Attorney’s Fees and Costs

 

Plaintiff’s Counsel requests $50,000 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 65.12 hours at $800 per hour. Under the lodestar approach, this would total $52,096 . The lodestar cross-check shows an implied negative multiplier of approximately 0.96. The Court finds the requested attorney’s fees reasonable. Likewise, the Court finds reasonable the requested $12,629.31 in costs.

 

4. Settlement Administrator

 

The Settlement Agreement estimates $2,750 in Settlement Administration Costs. Boyamian Decl. at p. 38 ¶19. Likewise, the motion seeks $2,750 to be paid to Simpluris Class Action Administration. Motion at p. 29:22-23. The Court finds this amount reasonable.

 

5. 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 plaintiff’s general release of all individual claims.

 

As in Ambrose, the Settlement Agreement provides a service award of $5,000 to compensate Plaintiff for his service on behalf of the LWDA and Aggrieved Employees. Boyamian Decl. at p. 37, Ex. 2 ¶ 17. However, unlike in Ambrose, it also provides an additional $5,000 “General Release Payment” to Plaintiff to release all his individual claims against the defendant or related parties arising from his employment. Id. ¶ 18. Plaintiff seeks two awards totaling $10,000, one for his service as plaintiff, and another for the general release of his claims. Because Plaintiff provides no evidence showing the actual value of his individual claims, the Court cannot determine if the $5,000 General Release Payment is reasonable. Moreover, the Ambrose court included the value of the general release into the service award. To avoid double counting the value of the general release, the Court will likewise consider the total value of the Service Award and General Release Payment together in determining their reasonableness.

The requested award is not justified by the time Plaintiff has put into the case. Plaintiff states that he spent approximately 25 hours assisting his attorneys and an additional 5 hours on his own. Rodrigeuz Decl. at p. 5 ¶¶ 9, 10. Dividing the requested $10,000 by 30 hours produces an unjustifiable hourly rate of $333 per hour. Nor does Plaintiff’s unsupported assertion of retaliation risk justify such an award. See Clark, supra, (2009) 175 Cal.App.4th at p. 805 (“[T]he trial court is not bound to, and should not, accept conclusory statements about ‘potential stigma’ and ‘potential risk,’ in the absence of supporting evidence or reasoned argument explaining why, under the particular circumstances, an actual—not a negligible—risk existed, or why it might be difficult to get plaintiffs to come forward to prosecute a particular case.”). Moreover, based on the 127 Aggrieved Employees and the $18,655.17 in PAGA penalties allocated to them, each employee will receive approximately $146.89 on average. An award that gives Plaintiff 68 times the average payout to an Aggrieved Employee cannot be justified on these facts. See ibid (“An enhancement that gives the named plaintiffs at least 44 times the average payout to a class member simply cannot be justified on the record in this case.”). Accordingly, the Court reduces the combined Service Award and General Release Payment from $10,000, to $5,000.

 

CONCLUSION

 

Plaintiff’s Motion for Order to Approve PAGA Settlement is granted as modified.