Judge Christopher K. Lui, Case Number: 20STCV31808, Date: 2024-10-08 Tentative Ruling

The hearing on the motion for preliminary approval of the class and PAGA settlement is CONTINUED to January 10, 2025 at 8:30 a.m. Plaintiffs are to address the deficiencies identified by the Court, especially, as noted by Objector Keith Davis, the valuation of each of the claims being released, such that the settlement amount may be compared.

Plaintiffs’ further brief and supporting declaration is due December 6, 2024. Any opposition is due December 20, 2024.

Plaintiffs move for preliminary approval of a class action settlement of wage and hour claims, including a PAGA claim for civil penalties.

“A settlement or compromise of an entire class action, or of a cause of action in a class action, or as to a party, requires the approval of the court after hearing.” (Cal. Rules of Court, Rule 3.769(a).)

Any party to a settlement agreement may serve and file a written notice of motion for preliminary approval of the settlement. The settlement agreement and proposed notice to class members must be filed with the motion, and the proposed order must be lodged with the motion.

Here, the settlement agreement and proposed notice to class members are attached as Exhibit A to the Declaration of Adam N. Bouayad.

Plaintiffs’ counsel represents that the W-2 Worker Sub-Class consists of 393 individuals and the W-2 Independent Contractor Sub-Class consists of 29 individuals.

Plaintiffs seek preliminary appointment of Chastity Bennett as the W-2 Worker Sub-Class Representative and Tien Pham as the Independent Contractor Sub-Class Representative.

In determining whether to approve a class settlement, the court’s responsibility is to “prevent fraud, collusion or unfairness to the class” through settlement because the rights of the class members and even named plaintiffs “may not have been given due regard by the negotiating parties.” (Consumer Advocacy Group, Inc. v. Kintetsu Enterprises of America (2006) 141 Cal.App.4^th 46, 60.) Furthermore, the Court must make an independent assessment of the reasonableness of the terms of the settlement. (Kullar v. Foot Locker Retail, Inc. (2008) 168 Cal.App.4^th 116, 130, 133.)

A settlement need not obtain 100 percent of the damages sought in order to be fair and reasonable. (Citations omitted.) Compromise is inherent and necessary in the settlement process. Thus, even if “the relief afforded by the proposed settlement is substantially narrower than it would be if the suits were to be successfully litigated,” this is no bar to a class settlement because “the public interest may indeed be served by a voluntary settlement in which each side gives ground in the interest of avoiding litigation.” (Citation omitted.)

(Wershba v. Apple Computer, Inc. (2001) 91 Cal.App.4th 224, 250, overruled on other grounds by Hernandez v. Restoration Hardware, Inc. (2018) 4 Cal.5th 260, 269.)

The burden of establishing the fairness and reasonableness of the settlement is on the proponent. (Wershba, supra, 91 Cal.App.4th at 245; see also 7-Eleven Owners for Fair Franchising v. The Southland Corp. (2000) 85 Cal.App.4^th 1135, 1165-66.)

In determining whether the class action settlement terms are fair, adequate and reasonable, the court apply several factors:

The list, which “ ‘is not exhaustive and should be tailored to each case,’ ” includes “ ‘the strength of plaintiffs’ case, the risk, expense, complexity and likely duration of further litigation, the risk of maintaining class action status through trial, the amount offered in settlement, the extent of discovery completed and the stage of the proceedings, the experience and views of counsel, the presence of a governmental participant, and the reaction of the class members to the proposed settlement.’ ” (Kullar, at p. 128, quoting Dunk v. Ford Motor Co. (1996) 48 Cal.App.4th 1794, 1801 [56 Cal. Rptr. 2d 483] (Dunk).) “ ‘ “The most important factor is the strength of the [*408] case for plaintiffs on the merits, balanced against the amount offered in settlement.” ’ ” (Kullar, supra, 168 Cal.App.4th at p. 130.) While the court “ ‘must stop short of the detailed and thorough investigation that it would undertake if it were actually trying the case,’ ” it “ ‘must eschew any rubber stamp approval in favor of an independent evaluation.’ ” (Ibid.)

Some cases state that a presumption of fairness exists “where: (1) the settlement is reached through arm's-length bargaining; (2) investigation and discovery are sufficient to allow counsel and the court to act intelligently; (3) counsel is experienced in similar litigation; and (4) the percentage of objectors is small.” (Dunk, supra, 48 Cal.App.4th at p. 1802.) Kullar emphasizes that this is only an initial presumption; a trial court's approval of a class action settlement will be vacated if the court “is not provided with basic information about the nature and magnitude of the claims in question and the basis for concluding that the consideration being paid for the release of those claims represents a reasonable compromise.” (Kullar, supra, 168 Cal.App.4th at pp. 130, 133.) In short, the trial court may not determine the adequacy of a class action settlement “without independently satisfying itself that the consideration being received for the release of the class members' claims is reasonable in light of the strengths and weaknesses of the claims and the risks of the particular litigation.” (Id. at p. 129.) n5

n5 Kullar continues: “The court undoubtedly should give considerable weight to the competency and integrity of counsel and the involvement of a neutral mediator in assuring itself that a settlement agreement represents an arm's-length transaction entered without self-dealing or other potential misconduct. While an agreement reached under these circumstances presumably will be fair to all concerned, particularly when few of the affected class members express objections, in the final analysis it is the court that bears the responsibility to ensure that the recovery represents a reasonable compromise, given the magnitude and apparent merit of the claims being released, discounted by the risks and expenses of attempting to establish and collect on those claims by pursuing the litigation. ‘The court has a fiduciary responsibility as guardians of the rights of the absentee class members when deciding whether to approve a settlement agreement.’ ” (Kullar, supra, 168 Cal.App.4th at p. 129.)

(Munoz v. BCI Coca-Cola Bottling Co. of Los Angeles (2010) 186 Cal.App.4th 399, 407-408.)

The record presented to the court must allow “an understanding of the amount that is in controversy and the realistic range of outcomes of the litigation,” given the strength of class claims and the risks and expense of litigating them. (Id. at 410-11.)

Although the court must inquire into the fairness of the proposed settlement before final approval (See Cal. Rules of Court, Rule 3.769(g)), in the interest of judicial economy, the Court views the appropriate stage to investigate a full and independent investigation at the preliminary approval stage to avoid issues arising at the final approval hearing that could have been addressed at the preliminary approval stage.

The fair, adequate and reasonable standard applicable to approval of class action settlements also applies to approval of PAGA settlements. (Moniz v. Adecco USA, Inc. (2021) 72 Cal.App.5th 56, 75-76.) In this regard, any deficiencies the Court finds at this preliminary approval stage must be remedied before Plaintiffs seek final approval of the settlement, otherwise, there is a possibility the Court will not grant final approval.

Here, the proof of service does not reflect that notice of this hearing was given to the LWDA. Labor Code § 2699(l)(2) requires that the proposed settlement shall be submitted to the [LWDA] at the same time that it is submitted to the court.” The Declaration of Adam N. Bouayad, dated September 16, 2024, states at ¶ 4:

4. A copy of the Settlement Agreement and the Motion for Preliminary Approval of Class/PAGA Settlement was served on the LWDA on May 17, 2024. I know this because I personally uploaded a copy of the Settlement Agreement and the Motion for Preliminary Approval of Class/PAGA Settlement to the LWDA website at:

https://www.dir.ca.gov/Private-Attorneys-General-Act/Private-Attorneys-General-Act.html. Attached hereto as Exhibit “I” is a true and correct copy of a September 16, 2024, email, which I received, confirming the LWDA’s receipt of my submission of the Settlement Agreement and the Motion for Preliminary Approval of Class/PAGA Settlement.

Given page limitations of a standard-sized brief, Plaintiff’s counsel has sufficiently complied with the format set forth in the Checklist for Preliminary Approval of Class Action Settlement utilized by the Complex Civil Department[1].

Labor Code, § 2699(l)(2) provides; “The superior court shall review and approve any settlement of any civil action filed pursuant to this part.” The PAGA statute has no notice requirements for unnamed aggrieved employees, and there is no right for them to opt out. (Turrieta v. Lyft, Inc. (2021) 69 Cal.App.5th 955, 974.)

The State is the real party in interest as to a PAGA claim. (Tanguilig v. Bloomingdale's, Inc. (2016) 5 Cal.App.5th 665, 680.) Pursuant to Labor Code § 2699(l)(2) & (4), a copy of the settlement agreement, and notice of this motion[2], was provided to the Labor and Workforce Development Agency (“LWDA”). (See Declaration of Vedang J. Patel, ¶ 11.)

The LWDA was given an opportunity to object if it wished to do so. The Court has not received any objection from the LWDA. It does not appear that Plaintiff received any objection from the LWDA. As such, the LWDA is deemed to have waived any such objection.

(i) Except as provided in subdivision (j), civil penalties recovered by aggrieved employees shall be distributed as follows: 75 percent to the Labor and Workforce Development Agency for enforcement of labor laws, including the administration of this part, and for education of employers and employees about their rights and responsibilities under this code, to be continuously appropriated to supplement and not supplant the funding to the agency for those purposes; and 25 percent to the aggrieved employees.

1. Settlement Class. For the purposes of this Settlement Agreement only, Plaintiffs and Defendant stipulate to the certi¿cation of the following Settlement Class:

All non-exempt hourly employees employed in California by Defendants from August 19, 2017, through the date of preliminary approval of this Settlement, who allegedly suffered one or more of the following violations:

c. Failure to receive compliant meal periods and failure to receive one (1) hours of pay at the employee‘s regular rate of compensation for each work day in which a compliant meal period was not authorized, permitted or provided;

d. Failure to receive compliant rest breaks and failure to receive one (1) hours of pay at the employees regular rate of compensation for each work day in which a compliant rest break was not authorized, permitted or provided;

e. Failure to receive legally accrued sick leave, notice of accrued sick leave or protection from discipline, discharge, demotion or termination for taking sick leave that otherwise should have been protected/paid;

f. Failure to receive the timely payment of all earned wages at the time of termination or resignation from Defendants;

g. Failure to receive accurate itemized wage statements pursuant to Labor Code §226 and/or maintain accurate records as required by Labor Code §1174;

h. Failure to receive reimbursement for expenses necessarily incurred as a direct consequence of the discharge of their duties as employees;

i. Being subject to the illegal deduction of wages, earned bonuses and/or incentive pay by Defendants.

For purposes of this Settlement Agreement only, Plaintiffs and Defendant stipulate to the certi¿cation of the following Settlement Subclasses:

a. Employees treated as non-exempt hourly W-2 employees (WV-2 Worker SQ-Class") who were subject to one or more of the alleged violations identi¿ed in Paragraph 1 above, from August 19, 2017, through the date of preliminary approval of this Settlement; and

b. Employees who were classi¿ed as independent contractors (“independent Contractor Sub-Class” and who were subject to one or more of the alleged violations identi¿ed in Paragraph 1 above, from August 19, 2017, through the date of preliminary approval of this Settlement.

Collectively, the “W—Z Worker Sub-Class” and “Independent Contractor Sub-Class” are referred as the “Settlement Class members” or “Class members.”

The time period of August 19, 2017 through preliminary approval of this Settlement shall be referred to herein as the “Class Period.”

The time period of June 12, 2019 through preliminary approval of this Settlement shall be referred to herein as the “PAGA Period.”

The Gross Settlement is $396,000.00, with Defendants to separately pay any and all employer payroll taxes owed on the Wage Portions of the Individual Class Payments. (Settlement Agreement, ¶ 3.D.) The Administrator will disburse the entire Gross Settlement Amount without asking or requiring Participating Class Members or Aggrieved Employees to submit any claim as a condition of payment, and none of the Gross Settlement Amount will revert to Defendants. (Id., ¶ 3.C, ¶ 4.)

From the $396,00.00 Gross Settlement Amount, the Administrator will pay: (1) $10,000 as a Class Representative/PAGA Representative Service Payment to Plaintiff Tien Pham, and $6,000.00 to Plaintiff Chasity Bennett as Class Representative Service Award (Settlement Agreement, ¶ 3.C(3)); (2) $131,868.00 (1/3 of the Gross Settlement Amount), as a Class Counsel Fees Payment (Id., ¶ 3.C(4)); (3) $11,750.00 for Settlement Administration Expenses (¶ 3.C(2)); (4) $25,000 of the Gross Settlement Amount for PAGA civil penalties. 75% ($18,750.00) payable to the LWDA and 25% ($6,250.00) payable to certain Settlement Class members as the “PAGA Amount.”; (5) Individual Settlement Award Payments to the Settlement Class as calculated pursuant to ¶ 4.

The settlement was reached following mediation, which suggests that it was negotiated at arms-length and is not collusive. (Bouayad Decl., ¶ 3.)

Plaintiff’s counsel engaged in factual and legal investigation and research, including consideration of the information set forth in the Bouayad Decl., ¶ 5.

Plaintiff’s counsel has explained that the potential risk, expense and complexity posed by further litigation influenced that decision to settlement. (Bouayad Decl., ¶¶ 6 – 15.)

Plaintiffs have not presented to the Court a sufficient explanation to allow “an understanding of the amount that is in controversy and the realistic range of outcomes of the litigation,” given the strength of class claims and the risks and expense of litigating them. (Munoz, supra, 186 Cal.App.4th at 410-11.)

Plaintiffs must provide information in the nature of what objector Keith Davis provides in his memorandum of points and authorities at Pages 5:12 – 8:16.

Plaintiffs must also address the issues with the proposed class notice identified by objector Davis at Pages 9:15 – 10:7.

Plaintiffs’ further brief and supporting declaration is due December 6, 2024. Any opposition is due December 20, 2024.

[1] The checklist may be found at: https://www.lacourt.org/division/civil/pdf/PreliminaryApprovalofClassActionSettlement.pdf

[2] At the prior hearing, the Court conferred with counsel about notice of this motion to the LWDA and was satisfied with the parties’ representations regarding notice.