Judge David S. Cunningham, Case Number: 19STCV38602, Date: 2024-05-31 Tentative Ruling

Judge: David S. Cunningham, Case: 19STCV38602, Date: 2024-05-31 Tentative Ruling

In December 2023, the parties participated in a mediation and reached a settlement.

PAGA permits an “aggrieved employee” to recover Labor Code civil penalties on the Labor & Workforce Development Agency’s (“LWDA”) behalf, if the LWDA declines to collect the penalties itself. (Cal. Lab. Code, § 2699, subd. (a); see also Mejia v. Merchants Building Maintenance, LLC (2019) 38 Cal.App.5th 723, 732-733.) The California Supreme Court has distinguished between Labor Code “civil penalties” that are “intended to ‘punish the employer’ for wrongdoing, often ‘without reference to the actual damage sustained’” and “statutory damages” that “primarily seek to compensate employees for actual losses incurred” – a PAGA action can recover only the former. (Z.B., N.A. v. Superior Court (2019) 8 Cal.5th 175, 182, 198 [holding that Labor Code section 558 “amount sufficient to recover unpaid wages” is not a “civil penalty” recoverable via PAGA].) “A PAGA action is ‘fundamentally a law enforcement action designed to protect the public and not to benefit private parties.’” (Mejia, supra, 38 Cal.App.5^th at 732; see also Iskanian v. CLS Transportation Los Angeles, LLC (2014) 59 Cal.4th 348, 381.)

PAGA requires a court to “review and approve any settlement of any civil action filed” under PAGA, but it does not provide review and approval standards or guidelines. (Cal. Lab. Code, § 2699, subd. (l)(2).) The California Supreme Court has interpreted PAGA as requiring courts to ensure that “any negotiated [PAGA] resolution is fair to those affected.” (Williams v. Superior Court (2017) 3 Cal.5th 531, 549, emphasis added).) The parties affected by a PAGA settlement include: (1) the LWDA, who receives 75% of settlement funds and is “bound by the outcome of the proceeding to adjudicate the employee’s PAGA claim” (Mejia, supra, 38 Cal.App.5th at 732); (2) the aggrieved employees, both party and non-party, who receive 25% percent of settlement funds and are, like the LWDA, bound by a PAGA action judgment; (3) plaintiffs’ counsel, who may be awarded reasonable attorney fees and costs; and (4) defendant, who pays the settlement.

Moniz v. Adecco USA, Inc. (2021) 72 Cal.App.5^th 56 provides greater detail about the standard courts should apply when evaluating PAGA settlements. The opinion adopts the “fair, reasonable, and adequate” standard used in class settlements.

Plaintiff’s counsel’s declaration establishes that, throughout the litigation, and in preparing for mediation, the parties took part in informal discovery. (See Solouki Decl., ¶¶ 7-10.) Plaintiff’s counsel used the information to assess the value of the case and the associated risks. (See id. at ¶¶ 7-21.) Ultimately, Plaintiff’s counsel came up with maximum, minimum, and discounted estimates. (See id. at ¶¶ 22, 25.) Plaintiff’s counsel asserts that the gross settlement amount ($800,000.00) “is within a reasonable range, especially considering the defenses Defendants raised” (ibid.; see also id. at ¶¶ 23-25) and that the settlement is fair, reasonable, and adequate:

26. [] [T]he gross PAGA Settlement is highly reasonable in light of the risks and uncertainties associated with the PAGA claims in this case. The Settlement commits Defendants to pay a sum large enough to punish Defendants for alleged violations and to deter such alleged conduct in the future. At the same time, in light of the alleged violations and defenses thereto, it is not so large as to be unjust, oppressive or confiscatory. Based upon the foregoing, the proposed Settlement is fair, reasonable, and in the best interest of the state of California and the Aggrieved Employees

27. Practically speaking, if Plaintiff and other Aggrieved Employees continued litigating this matter, Plaintiff and other Aggrieved Employees and the LWDA potentially could have received nothing if the Court had agreed with Defendants’ position especially in light of the volatility of this area of law, the aforementioned defenses. The Settlement is reasonable in light of the risks involved in this case – including the prospect of a potential adverse summary adjudication ruling, defenses to the case, potential appeal, and potential costs which could be forced on our client if Plaintiff and other aggrieved employees were not successful. Counsel for Plaintiff and other Aggrieved Employees are convinced that the proposed Settlement is fair based on the negotiations and a detailed knowledge of the issues present in this action. The length and risks associated with a motion for summary adjudication, trial, and other normal perils of litigation have impacted the value of the claims and were all weighed in reaching the proposed settlement. In light of the above, the proposed Settlement is well within the range of reasonableness and should be granted approval. Plaintiff believes that in providing employees with relief and obtaining penalties for the LWDA, this Settlement furthers the purpose of PAGA to enforce compliance with the Labor Code and should be approved.

28. Counsel for Plaintiff and other Aggrieved Employees are convinced that the proposed Settlement is fair based on the negotiations and a detailed knowledge of the issues present in this action. The length and risks associated with a motion for summary adjudication, trial, and other normal perils of litigation have impacted the value of the claims and were all weighed in reaching the proposed settlement. In light of the above, the proposed Settlement is well within the range of reasonableness and should be granted approval. Plaintiff believes that in providing employees with relief and obtaining penalties for the LWDA, this Settlement furthers the purpose of PAGA to enforce compliance with the Labor Code and should be approved.

The gross settlement amount ($800,000.00) is fair, reasonable, and adequate because the parties agreed to it via arm’s-length mediation after investigation and discovery, it constitutes approximately 13% of the maximum possible exposure, which is a reasonable deduction given the risks and weaknesses, and it is hundreds of thousands of dollars greater than Plaintiff’s counsel’s minimum estimate. (See id. at ¶ 25.)

The amount for attorney fees ($266,666.00) is fair, reasonable, and adequate because Plaintiff’s counsel represented Plaintiff on a contingency basis. (See Motion, p. 22.) One-third of the gross recovery is standard in contingency cases.

The amount for attorney costs (29,256.81) is fair, reasonable, and adequate because, in addition to being modest in general, it is less than 4% of the gross settlement amount.[1]

The amount for administration costs ($15,000.00) is fair, reasonable, and adequate because it is unopposed and within the range that this Court has approved in other complex cases.

Same analysis. The amount for the incentive award ($5,000.00) is fair, reasonable, and adequate because it is unopposed and within the Court’s standard range.

The net settlement amount ($484,077.19) is fair, reasonable, and adequate because it is approximately 61% of the gross settlement amount. The LWDA is entitled to receive 75% ($363,057.89), and the aggrieved employees are entitled to receive 25% ($121,019.30).

5.1 Plaintiff Herrera’s Release. Plaintiff Herrera and his respective former and present spouses, representatives, agents, attorneys (including PAGA Counsel), heirs, administrators, successors, and assigns generally, release and discharge Released Parties from all claims, transactions, or occurrences that occurred during the PAGA Period, including, but not limited to: (a) all claims that were, or reasonably could have been, alleged, based on the facts contained in the Herrera Complaint and the PAGA Notice (“Plaintiff Herrera’s Release”). Plaintiff Herrera’s Release does not extend to any claims or actions to enforce this Agreement, or to any claims for vested benefits, unemployment benefits, disability benefits, social security benefits, workers’ compensation benefits that arose at any time, or based on occurrences outside the PAGA Period. Plaintiff Herrera acknowledges that Plaintiff Herrera may discover facts or law different from, or in addition to, the facts or law that Plaintiff Herrera now knows or believes to be true but agrees, nonetheless, that Plaintiff Herrera’s Release shall be and remain effective in all respects, notwithstanding such different or additional facts or Plaintiff Herrera’s discovery of them.

All Aggrieved Employees are deemed to release, on behalf of themselves and their respective former and present representatives, agents, attorneys, heirs, administrators, successors, and assigns, the Released Parties from the claims asserted under the PAGA, as pled in the Herrera Complaint and the PAGA Notice, or that could have been pled based on the factual allegations pled in the Herrera Complaint and the PAGA Notice, on behalf of all current and former non-exempt employees, who work or worked for Defendant at any time during the PAGA Period.

PAGA Counsel release on behalf of their present and former attorneys, employees, agents, successors and assigns the Released Parties from all claims for PAGA Fees incurred in connection with the Herrera Complaint and the PAGA Period facts stated in the Herrera Complaint and the PAGA Notice.

The Court is concerned about overbreadth. Do the parties have standing to release claims on behalf of heirs, etc.? At the hearing, counsel needs to address the scope of the releases.[2]

[1] The settlement agreement sets a $40,000.00 cap for costs, but Plaintiff’s counsel has only incurred $29,256.81 so far. The Court is inclined to award the incurred amount instead of the capped amount. This will allow additional settlement money to go to the LWDA and aggrieved employees.

[2] Notably, a PAGA action does not involve aggrieved employees’ individual claims for Labor Code penalties, only civil penalties that the LWDA may assess. In light of this, a PAGA settlement should only preclude future PAGA enforcement and not employees’ individual claims. (See, e.g., Julian v. Glenair, Inc. (2017) 17 Cal.App.5th 853, 871 [“PAGA does not create any new substantive rights or legal obligations, but ‘is simply a procedural statute allowing an aggrieved employee to recover civil penalties — for Labor Code violations — that otherwise would be sought by state labor law enforcement agencies’”]; see also Iskanian, supra, 59 Cal.4th at pp. 386-387 [a PAGA claim “is a dispute between an employer and the state, which alleges directly or through its agents — either the Labor and Workforce Development Agency or aggrieved employees — that the employer has violated the Labor Code”].)