Judge David S. Cunningham, Case Number: 23STCV17285, Date: 2025-02-03 Tentative Ruling

Judge: David S. Cunningham, Case: 23STCV17285, Date: 2025-02-03 Tentative Ruling

During oral arguments, the Court will ask Plaintiff’s counsel to discuss the scope of the release.

In August 2024, the parties participated in mediation and eventually reached a PAGA-only settlement.

PAGA permits an “aggrieved employee” to recover Labor Code civil penalties on the LWDA’s 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. Plaintiff’s counsel used the information to assess the value of the case and associated risks. Ultimately, Plaintiff’s counsel came up with maximum and discounted estimates. Plaintiff’s counsel asserts that the gross settlement amount is within a reasonable range, especially considering the defenses Defendant raised, and that the settlement is fair, reasonable, and adequate. (See Larsen Decl., ¶¶ 14-15, 19-25, 27; see also Motion, p. 4.)

The parties agreed to the gross settlement amount ($65,000.00) via arm’s-length mediation after investigation and discovery. The amount is fair, reasonable, and adequate given that it is approximately:

The amount for attorney fees ($21,666.45) is fair, reasonable, and adequate because Plaintiff’s counsel represented Plaintiff on a contingency basis. (See Motion, p. 15.) One-third of the gross recovery is standard in contingency cases.

The amount for attorney costs ($8,581.65) is fair, reasonable, and adequate because, in addition to being modest in general, it is under 13% of the gross settlement amount.

The settlement agreement sets a $9,000.00 cap for costs (see Larsen Decl., Ex. 1, § III.4.a.), yet Plaintiff’s attorneys have only incurred $8,581.65 so far. If the costs do not eventually reach the cap, the Court intends to award the incurred amount rather than the capped amount. This would allow additional settlement money to go to the LWDA and aggrieved employees.

The amount for administration costs ($2,450.00) is fair, reasonable, and adequate because it is unopposed and within the range that this Court has approved in other complex cases. It is less than 4% of the gross settlement amount.

The cap for the administration costs is $5,000.00. (See id. at Ex. 1, § III.4.c.) Like the attorney costs, the Court intends to award the incurred amount rather than the capped amount if they turn out to be different.

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 ($27,301.90) is approximately 42% of the gross settlement amount. It is fair, reasonable, and adequate.

6. PAGA Released Claims. Upon the occurrence of the Effective Date and the Settlement being fully funded, Plaintiff and all Aggrieved Employees will release the PAGA Released Claims against the Released Parties that arose during the PAGA Period. Upon the occurrence of the Effective Date and the Settlement being fully funded, Plaintiff and all Aggrieved Employees will be forever barred from pursuing any and all of the PAGA Released Claims that arose during the PAGA Period against the Released Parties. Aggrieved Employees do not have the right to opt-out of the Settlement.

7. Waiver of Civil Code Section 1542. Upon the Effective Date and Defendant funding the Gross Settlement Amount, pursuant to the terms of the Settlement, Plaintiff expressly waives and relinquishes any rights or benefits available under the provisions of section 1542 of the Civil Code, which provides as follows:

A GENERAL RELEASE DOES NOT EXTEND TO CLAIMS THAT THE CREDITOR OR RELEASING PARTY DOES NOT KNOW OR SUSPECT TO EXIST IN HIS OR HER FAVOR AT THE TIME OF EXECUTING THE RELEASE AND THAT, IF KNOWN BY HIM OR HER, WOULD HAVE MATERIALLY AFFECTED HIS OR HER SETTLEMENT WITH THE DEBTOR OR RELEASED PARTY.

The Court is concerned about overbreadth. Is the definition of “Released Parties” overinclusive?[2] At the hearing, Plaintiff’s counsel needs to address the scope of the release.[3]

[1] “PAGA” means Private Attorneys General Act.

[2] The definition is “Defendant and its former, present and future owners, parents, affiliates, and subsidiaries, and all of its current, former and future officers, directors, members, managers, partners, shareholders, employees, joint venturers, successors, attorneys, assigns, accountants, insurers, or legal representatives.” (Id. at Ex. 1, § I.16.)

[3] 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”].)