Judge: Armen Tamzarian, Case: 21STCV28667, Date: 2022-10-26 Tentative Ruling

Case Number: 21STCV28667    Hearing Date: October 26, 2022    Dept: 52

8/4/21: Initial complaint.

4/27/22: Plaintiff Andre Clarizio, as an individual and on behalf of other aggrieved employees, filed the operative third amended complaint against defendant Guard-Systems, Inc. for 10 Labor Code violations, unfair competition, and PAGA civil penalties.

Plaintiff worked for defendant from 2017 to 2020.  (Job not specified.)  The complaint also purports to be a class action.  The class or group of aggrieved employees is all current and former non-exempt California employees.

Motion

Plaintiff seeks an order granting preliminary approval of:

1) Conditional certification of the class of hourly employees from 8/4/2020 to the present (subject to a maximum number of workweeks), for the purpose of settlement only;

2) Plaintiff as class representative;

3) Appointing David D. Bibiyan as class counsel;

4) The settlement terms;

5) The $250,000 gross settlement amount (subject to escalation);

6) The class notice;

7) Appointing ILYM Group, Inc. to administer the settlement;

8) Payment of $13,920 to ILYM (there is a typo saying $12,920);

9) A representative enhancement of $7,500 for plaintiff’

10) Attorney fees of 35% ($87,500);

11) Costs of up to $25,000;

12) PAGA penalties of $40,000;

13) The settlement.  (Seems redundant.)

The parties did informal discovery including a sampling of time and pay records for the 702 class members.  The parties settled during mediation before Steve Mehta, Esq.  The parties agreed to filing of a third amended complaint adding causes of action for Labor Code §§ 212 and 213, which was done in April. 

Defendant believes the class period of August 4, 2020, to the date of preliminary approval covers 22,988 weekly pay periods.  If the true number of pay periods turns out to be higher, defendant has the option to shorten the class period to the date resulting in a maximum of 25,287 workweeks.  If the true number is more than 10% (2,299 workweeks) more than estimated, the settlement will be increased proportionally at the current rate, $10.88 per workweek.   

There is a presumption of fairness.  The parties have experienced counsel and did significant research and investigation, including damage analysis with expert consultants.  The parties settled via arms-length negotiations at a mediation.

Plaintiff estimates defendant’s exposure as:

1.     Unpaid wages (off-the-clock work and overtime): $268,596

2.     Meal period violations: $493,805

3.     Rest periods: $338,755

4.     Failure to indemnify business expenses: $0

5.     Wage statements: $459,760 (20% of max $2,298,800)

6.     Waiting time penalties: $317,126 (20% of maximum $1,585,632)

7.     PAGA penalties: $8,087,300 maximum, reduced by 90% to $808,730 based upon:

a.     Overtime: $1,149,400 (22,988 pay periods x $50)

b.     Minimum wage: $2,298,800 (22,988 x $100)

c.     Meal periods: $1,149,400

d.     Rest periods: $1,149,400

e.     Waiting time: $41,500 (415 former employees x $100)

f.      Wage statements: $2,298,800 (22,988 x $100)

g.     Business expenses: $0

Defendant has various defenses, such as that none of this is true, the penalties cannot be stacked (or that the court would exercise its discretion not to award subsequent violation rates), and individualized issues predominate.  Also, defendant is struggling now due to the pandemic.

The 35% fees are reasonable, and no lodestar check is required.  The $7,500 representative enhancement to plaintiff is appropriate because he spent a lot of time assisting counsel.  The class should be preliminary certified.  It meets all the elements.

Prior Hearing

           On September 19, the court found this case related to Ricardo Lopez v. Guard-Systems, Inc., No. 22STCV02112, which is includes overlapping PAGA claims.  The court also continued this motion for preliminary approval because: “The proposed settlement therefore also affects Ricardo Lopez, the plaintiff in the related action, and his counsel.  They are entitled to notice and an opportunity to be heard on this motion.”  The court order plaintiff Clarizio to serve the moving papers and notice of this hearing on Ricardo Lopez

There is no proof of service on Lopez.  Nothing has been filed since September 19.

Discussion

Once plaintiff gives notice to Ricardo Lopez and his counsel, the court thinks this should be granted on the merits.  It is significantly higher than the typical PAGA settlement because it includes class claims for the employees’ actual lost wages.  If one separates out the funds, employees get an average of $14.25 for the PAGA penalties and $108.38 for lost wages.  Perhaps it is low for lost wages, but they have the right to opt out of that portion of the settlement.

The settlement is Exhibit 1 to the Patel declaration.  The notice is Exhibit A to the settlement.

The pay period is weekly, which is unusual. 

Plaintiff drastically underestimated all the PAGA penalties, which he sort of acknowledges.  The penalties all increase for every subsequent violation (per employee), going from $100 to $250 for minimum wage and from $50 to $100 for the rest.    

Plaintiff used the initial violation rate for all 22,988 pay periods.  The true exposure is 702 initial pay periods for each violation (for 702 employees), plus the escalated penalties times the remaining pay periods.  So, the true exposure is almost 2 times higher for each violation, except for minimum wage at almost 2.5 times higher.

Plaintiff submitted a copy to LWDA.  (Patel Decl., ¶ 17, Ex. 4.)

The proposed order is appropriate.  It has blank spaces for the date of the final approval hearing (page 8, ¶ 22) and deadlines to file supporting documents before it (page 7, ¶ 21).

Details on the settlement and notice:

Settlement Class Definition

All current and former non-exempt, hourly employees “who worked outside of the office” (Settlement, ¶ 1.5) from August 4, 2020, to preliminary approval date (subject to earlier date based on max workweeks) (¶ 1.12). 

Released Claims

The released class claims and released PAGA claims are all that were or could have been alleged based on the same facts as in the complaint or the PAGA notice letter to LWDA.  (¶¶ 5.2, 5.4.)

Administration

           Defendant will provide the class data (class members’ contact info and pay periods worked) to the administrator within 7 days of preliminary approval.  (¶ 4.2)  Within 3 days of receiving the class data, the administrator will notify class counsel and summarize the number of members, etc. (¶ 7.4.1.)  Within 14 days of receiving class data, the administrator will send notice to the class members.  (¶ 7.4.2.)  Within 3 days of receiving returned mail, the administrator will re-send the notice to any updated address found.  (¶ 7.4.3.)    

           Class members have 45 days to opt out after receiving notice, plus an extra 15 for any whose initial notice was not delivered.  (¶ 7.5.1.)  The same deadline applies to challenges to the calculation of workweeks (¶ 7.6.) and to any other objections to the settlement (¶ 7.7.1).   

Defendant will pay within 7 days of the effective date, which is when the court grants final approval.  (¶ 4.3.)   The administrator will send checks within 7 days.  (¶ 4.4.)  

Analysis of Settlement Agreement

A.  Does a presumption of fairness exist? 

a.   Agreement reached through arms-length bargaining?  Yes.  Plaintiff investigated and did discovery.  The parties settled after mediation.  (Patel Decl., ¶ 18.)

b.  Investigation and discovery sufficient to allow counsel and the court to act intelligently?  Yes.  (Patel Decl., ¶ 18.)

c.   Counsel is experienced in similar litigation?  Yes.  (Bibiyan Decl., ¶¶ 5-9.) 

d.  Conclusion: The settlement is entitled to a presumption of fairness. 

B.  Is the settlement fair, adequate and reasonable?  

a.   Strength of Plaintiffs’ case and Risks of Further Litigation.

Typical.

b.  Amount offered in settlement.

The gross fund of $250,000 is about 9% of plaintiffs’ exposure calculations (which already include reductions for risk).  This is typical. 

PAGA penalties represent 30% of the estimated exposure but only 16% of the gross fund.  It is close enough and not unusual.

Fees of 35% are standard.  There is no need for a lodestar crosscheck.  At, say, $350 hourly, $87,500 would be 250 hours of fees.  Patel’s declaration says plaintiff’s counsel spent “hundreds of hours.”  (¶ 69.)  It seems reasonable and believable.

Plaintiff Andre Clarizio submitted a declaration saying he spent 21 hours on the case.  The $7,500 enhancement for him is fair.

c.   Extent of discovery completed.

Reviewed 20% sample of time and pay records, data about employee numbers and locations, defendants’ policies, plaintiff’s records, and documents about defendant’s finances.  (Patel Decl., ¶ 7.)  Seems fine.  A 20% sample is more thorough than usual for this sort of discovery.

d.  Views of Counsel.

Plaintiff’s counsel believe the terms of the settlement are fair.  (Patel Decl., ¶ 9; Bibiyan Decl., ¶ 15.) 

e.   Conclusion

This is fair.

C.  Conditional Class Certification? 

Although a detailed analysis of the elements required for class certification is not required, it is advisable to review each element when a class is being conditionally certified.  (See Amchem Products, Inc. v. Windsor (1997) 521 U.S. 591, 620, 622-627.) The trial court can use a lesser standard of scrutiny in approving a class settlement instead of certifying a class for litigation.  (See Dunk v. Ford Motor Co. (1996) 48 Cal.App.4th 1794, 1807 fn. 19.)

Plaintiffs provide adequate information for class certification.  The class has about 702 people, making joinder of all members impractical.  The labor laws apply equally to all members of the class, and the claims are based on defendant’s common practices.  The class members would be subject to the same relief and are adequately represented by the class representatives.

D.  Notice to Class of Final Approval Hearing (Cal. Rules of Court, rule 3.766)

Required Contents of Notice:  (Patel Decl., Ex. 1.A.) 

 Class definition

 Description of substantive issues and proceedings to date

 Neutral description of proposed settlement

 Amount of attorney fees and expenses

 Amount of representative enhancement

 How to participate

 Right to opt out

 Right to object and appear by counsel

 Consequences of participating

 Identifies plaintiff’s counsel

 Date, time, and place of fairness hearing (placeholder)

Tentative Ruling:

           Plaintiff Andre Clarizio’s Motion for Preliminary Approval of Class and Representative Action Settlement

Plaintiff Andre Clarizio moves for preliminary approval of a class action settlement under California Rules of Court, rule 3.769.  “A settlement or compromise of an entire class action… requires the approval of the court after hearing.”  (Cal. Rules of Court, rule 3.769(a).)  Courts may grant preliminary approval of a settlement.  (Rule 3.769(c).)  Courts exercise their discretion to determine if the settlement is fair and reasonable to all involved.  (Nordstrom Com. Cases (2010) 186 Cal.App.4th 576, 581.) 

On September 19, 2022, the court continued this hearing and ordered plaintiff Andre Clarizio to serve the moving papers and notice of the hearing on Ricardo Lopez, plaintiff in the related action, Ricardo Lopez v. Guard Systems, Inc., No. 22STCV02112.  Plaintiff has not filed proof of service on Ricardo Lopez.

The court hereby continues the hearing on plaintiff’s motion for preliminary approval of class action settlement to November 28, 2022, at 9:00 a.m. 

Plaintiff Andre Clarizio is ordered within ten days to serve the moving papers and notice of the continued hearing on Ricardo Lopez and to file proof of service with the court.  Ricardo Lopez shall file any response to the motion by November 15.