Judge: John J. Kralik, Case: 20STCV02267, Date: 2022-09-09 Tentative Ruling

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Case Number: 20STCV02267    Hearing Date: September 9, 2022    Dept: NCB

Superior Court of California

County of Los Angeles

North Central District

Department B

BACKGROUND

A.    Allegations

Plaintiff Christina Beltran, an individual, on behalf of the State of California, as a private attorney general, and on behalf of all other aggrieved employees (“Plaintiff”), filed this wage and hour action against Defendant Hutchinson Aerospace & Industry, Inc. (“Defendant”).  Plaintiff alleges that she and the aggrieved employees were non-exempt employees for purposes of minimum and overtime wages, meal periods, and rest periods for the times pertinent to this action. 

The First Amended PAGA Representative Action Complaint, filed on July 27, 2020, alleges a single cause of action for penalties pursuant to Labor Code, § 2699, et seq. (for violations of Labor Code, §§ 201, 202, 203, 204, 226, 226.3, 226.7, 510, 512, 1194, 1194.2, 1197, 1197.1, 1198, 1199, and the applicable IWC Wage Order).

B.     Relevant Background and Motion on Calendar

The parties participated in 2 mediations: (1) on March 9, 2020 with Louis Marlin and (2) February 15, 2022 with the Honorable Jan M. Adler (Ret.).  As a result of the second mediation, the parties were able to resolve the case and reached an agreement with Judge Adler’s assistance.  The parties entered the Stipulation and Agreement for PAGA Representative Action Settlement (“Settlement Agreement”). 

On June 16, 2022, Plaintiff filed a motion for approval of the PAGA settlement. 

DISCUSSION

A.                PAGA “AGGRIEVED EMPLOYEES” DEFINITION

“Aggrieved Employees” means “all individuals who are or were employed as hourly, nonexempt, employees by Defendant in California during the PAGA Period.”  (Settlement Agreement, ¶2.)  The “PAGA Period” means the period from July 29, 2018 through February 15, 2022.  (Id., ¶13.)  The “PAGA Claim” means “the claim for civil penalties under the California Labor Code Private Attorneys General Act of 2004 (Cal. Lab. Code sections 2698 et seq., “PAGA”) alleged in the Action.”  (Id., ¶11.) 

B.                 TERMS OF SETTLEMENT AGREEMENT

A copy of the fully executed Settlement Agreement is attached as Exhibit 1 to the declaration of Jonathan Melmed.  The Settlement Agreement was entered between Plaintiff Christina Beltran (on behalf of herself and as a representative of the State of California and the Aggrieved Employees) and Defendant Hutchinson Aerospace & Industry, Inc.  The parties executed the Settlement Agreement on May 2 and May 3, 2022.  The essential terms are as follows:

·         The Gross Settlement Amount (“GSA”) is $250,000, which includes all payments owing as a result of this Agreement and includes: the Net Settlement Amount; Representative Plaintiff Enhancement Award; Settlement Administration Costs; and PAGA Counsel Attorneys’ Fees and Costs as awarded by the Court.  (¶7) 

o   The GSA shall not increase, unless the total number of pay periods at the end of the PAGA Period exceeds 6,696, in which case the GSA shall increase proportionally for each additional pay period worked over 6,696. (¶28)

·         The Net Settlement Amount (“NSA”) is the GSA less the PAGA Counsel’s Attorney’s Fees and Costs, Representative Plaintiff’s Enhancement Award, and Settlement Administration Costs.  (¶9.) 

·         The LWDA Payment is the payment to the LDWA in an amount equal to 75% of the NSA.  (¶8.) 

·         The PAGA Aggrieved Employee Payment means a payment of 25% of the NSA, which the Parties have agreed to pay the Aggrieved Employees in connection with the settlement of the PAGA Claim.  (¶10)

o   The Individual PAGA Payments will be paid on a pro rata basis to be payable to each Aggrieved Employee.  (¶28.d) The individual PAGA Payments will be treated as non-wage income to the Aggrieved Employees and reported by the Settlement Administrator on IRS Form 1099.  (¶28.e)

·         The GSA is broken down as follows (¶¶27-28):

o   PAGA Counsel Attorney’s fees not to exceed (1/3 of GSA) $83,333.33

o   PAGA Counsel Costs not to exceed $14,000

o   Plaintiff’s enhancement fee up to $7,500

o   Settlement administration costs not to exceed $10,000

o   NSA in the approximate amount of $135,166,67

§  25% of the NSA (PAGA Aggrieved Employee Payment) is approximately $33,791.67

§  75% of the NSA (LWDA Payment) is approximately $101,375

·         The “Effective Date” is “the date the Court’s order approving the settlement and judgment thereon (“Judgment”) becomes final. For purposes of the Settlement Agreement, the Court’s Judgment “becomes final” upon the later of: (i) if no appeal is filed, the date that the court enters its order granting approval; (ii) if an appeal is filed, the date affirmance of an appeal of the Judgment becomes final; or (iii) if an appeal is filed, the date of final dismissal of any appeal from the Judgment or the final dismissal of any proceeding on review of any court of appeal decision relating to the Judgment. (¶5)

·         Upon issuance of the Final Order and Judgment and a preceding Effective Date, Defendant shall pay the GSA to the Settlement Administrator within 20 days of the Effective Date (“Funding Date”).  Within 20 days of receipt of the GSA, the Settlement Administrator shall issue all payments required by the Settlement Agreement (“Payment Date”).  (¶31)

o   Within 5 days of the Effective Date, Defendant will provide a PAGA List to the Settlement Administrator which will identify all Aggrieved Employees by name, social security number, and last known home address (“PAGA List”). The PAGA List will also contain the number of pay periods credited to each Aggrieved Employee. (¶32)

o   Within 10 days after the Settlement Administrator receives the PAGA List, the Settlement Administrator will provide to PAGA Counsel and Defendant’s counsel a Proceeds List reflecting the Individual PAGA Payment for each Aggrieved Employee (“Proceeds List”). The Proceeds List provided to PAGA Counsel will not include the Aggrieved Employees’ names, social security numbers or contact information.  (¶33)

o   On the Payment Date, the Settlement Administrator will mail to each Aggrieved Employee, via first-class United States Mail, the following: (a) the PAGA Settlement Notice in English and (b) their Individual PAGA Payment (collectively, the “PAGA Packet”). Prior to mailing, the Settlement Administrator will update addresses using the National Change of Address System. If a PAGA Packet is returned with a forwarding address, the Settlement Administrator will re-send the PAGA Packet. If no forwarding address is provided, then it will promptly conduct a skip trace or credit header search to locate a better address and re-send the packet. If no better address is found or the PAGA Packet is returned without a forwarding address, then no further steps will be required.  (¶34.) 

o   Aggrieved Employees will have 180 calendar days after the PAGA Packet is mailed to them to cash their settlement payment checks. If the check is not cashed, the settlement payment check will be voided and a stop-payment will be issued. Any unpaid cash residue or unclaimed funds, plus any accrued interest, shall be transmitted to the State of California Unclaimed Wage or Property Fund.  (¶34)

o   On the Payment Date, the Settlement Administrator will pay Plaintiff’s enhancement award, PAGA Counsel’s court-approved attorney’s fees and costs, and the LWDA payment.  (¶35)

·         A copy of the PAGA Settlement Notice in English is attached as Exhibit A to the Settlement Agreement.

·         On July 29, 2019, Plaintiff submitted a letter to the LWDA to notify the LWDA of Plaintiff’s intent to seek civil penalties under PAGA for various Labor Code violations and the applicable IWC Wage Order.  (Melmed Decl., ¶10; Ex. 2.)  The LWDA did not respond to the notice. (Id.) 

·         ILYM Group, Inc. will perform settlement administration.  (¶17)    

C.                ANALYSIS OF SETTLEMENT AGREEMENT

            “The superior court shall review and approve any penalties sought as part of a proposed settlement agreement pursuant to this part [i.e., PAGA].”  See Labor Code §2699(l).  The PAGA statute does not set forth the criteria for judging a PAGA settlement.  A representative action under PAGA need not satisfy class action requirements.[1]

            In the moving papers, Plaintiff argues that a PAGA-only settlement merely requires a one-step review and approval process.  (Mot. at p.3.) 

            The Court will make its determination on whether the Settlement Agreement is fair and should be approved.

1.      Does a presumption of fairness exist?

a.       Was the settlement reached through arm’s-length bargaining?  Yes.  (Melmed Decl., ¶14.) 

b.      Were investigation and discovery sufficient to allow counsel and the court to act intelligently?  Yes.  (Id., ¶13.) 

c.       Is counsel experienced in similar litigation?  Yes.  Counsel is experienced in class action and PAGA litigation, including wage and hour actions. (Id., ¶¶3-9.) 

d.      What percentage of the class has objected?  Not applicable.  No notice (and thus, no opportunity to object) is necessary.  See Arias v. Superior Court (2009) 46 Cal.4^th 969, 984 (rejecting the argument that representative actions under PAGA violate the due process rights of “nonparty aggrieved employees who are not given notice of, and an opportunity to be heard”); see also Ochoa-Hernandez v. Cjaders Foods, Inc. (N.D.Cal. 2010) 2010 WL 1340777 at 4 (“[U]nlike the binding finality of a class action with respect to damages, the individual employee has less at stake in a PAGA representative action:  if the employer defeats a PAGA claim, the nonparty employees, because they were not given notice of the action or afforded an opportunity to be heard, are not bound by the judgment as to remedies other than civil penalties.  Thus, nonparty employees can bring an action against the employer based on identical facts so long as they do not seek civil penalties.  Class members, however, would be bound by a judgment against the class, independent of the remedy later sought.”) (citations omitted).

2.      Is the settlement fair, adequate, and reasonable?

a.       Strength of Plaintiffs’ case.  “The most important factor is the strength of the case for plaintiffs on the merits, balanced against the amount offered in settlement.”   Kullar, supra at 130.

Counsel provides his analysis on the reasonableness of the settlement based on the evaluated merits of the case and the nature/purpose of PAGA.  (Melmed Decl., ¶¶16-41.)  Counsel states that the maximum potential exposure for the PAGA claims is $669,600 (i.e., approximately 6,696 pay periods during the PAGA Period, at $100 a penalty). (Id., ¶42.)  Counsel argues that the GSA of $250,000 is reasonable because a low settlement amount could be $33,480 (if only $5/hour for PAGA violation was awarded).  (Id., ¶43.)  Counsel also discusses Defendant’s vigorous defenses.  (Id., ¶¶44-47.)  Finally, Counsel states that the releases are confined solely to PAGA claims, the NSA remaining for the State and Aggrieved Employees is reasonable, and public policy strongly favors settlements.  (Id., ¶¶48—50.) 

b.      Risk, expense, complexity and likely duration of further litigation.  Procedural hurdles (e.g., motion practice and appeals) are likely to prolong the litigation as well as any recovery of the LWDA and the aggrieved employees. 

c.       Risk of maintaining class action status through trial.  Not applicable.

d.      Amount offered in settlement. As indicated above, the GSA is $250,000.  Assuming that the Court approves the maximum attorney fees ($83,333.33) and costs ($14,000), Plaintiff’s enhancement fee of $7,500, and the settlement administration cost of $10,000, the NSA will be approximately $135,166,67.  Of this amount, the Settlement Agreement contemplates that 75% ($101,375) will be paid to the LWDA and 25% ($33,791.67) will be paid to the Aggrieved Employees.

e.       Extent of discovery completed and stage of the proceedings.  As discussed above, at the time of the settlement, counsel had conducted extensive discovery.

f.        Experience and views of counsel.  The settlement was negotiated and endorsed by counsel who, as indicated above, are experienced in class action and PAGA litigation, including wage and hour cases.  Based upon their investigation and analysis, counsel opines that this settlement is fair, reasonable, and adequate.  (Melmed Decl., ¶51.)

g.      Presence of a governmental participant.  “[A] PAGA claim brought by a private plaintiff is brought on behalf of the Labor Workforce Development Agency, which could have brought the enforcement action to protect the people of the State of California.”  See Ochoa-Hernandez, 2010 WL 1340777 at 3.  This appears to be the extent of the LWDA’s participation in this case.  In fact, the LWDA did not respond to Plaintiff’s PAGA letter. Melmed Declaration, ¶10.

h.      Reaction of the class members to the proposed settlement. Not applicable.  “Unnamed employees need not be given notice of the PAGA claim, nor do they have the ability to opt-out of the representative PAGA claim.  There is no indication that the unnamed plaintiffs can contest a settlement, if any, reached between the parties.  The court does not have to approve the named PAGA plaintiff, nor does the court inquire into the adequacy of counsel's ability to represent the unnamed employees.”  See Ochoa-Hernandez, 2010 WL 1340777 at 5.

3.      Scope of Release

The Settlement Agreement defines the release as follows:

·         “Released Claims” means “those claims for PAGA penalties arising out of or related to the allegations set forth in the operative complaint and/or PAGA notice to the California Labor and Workforce Development Agency that arose during the PAGA Period, including claims for: (1) failure to pay minimum wage for all hours worked in violation of Labor Code sections 1194 and 1194.2, and the applicable IWC Wage Order(s); (2) failure to pay proper overtime wages in violation of Labor Code sections 510, 1197, and 1198, and the applicable IWC Wage Order(s); (3) failure to provide compliant rest periods and pay missed rest break premiums in violation of Labor Code section 226.7 and the applicable IWC Wage Order(s); (4) failure to provide compliant meal periods and pay missed meal period premiums in violation of Labor Code sections 226.7 and 512, and the applicable IWC Wage Order(s); (5) failure to pay timely wages during employment in violation of Labor Code sections 204, 210; (6) failure to pay all wages due and owing at separation in violation of Labor Code sections 201, 202, and 203; and (7) failure to provide complete and accurate wage statements in violation of Labor Code sections 226 and 226.3.”  (¶14)

·         The “Released Parties” include: “Defendant and all of Defendant’s subsidiaries, parent corporations, affiliates, shareholders, members, agents, predecessors, successors, and assigns.”  (¶15)

The releases appear to be proper. The release is tethered to the facts pleaded and to the PAGA Period.

4.      Is the notice proper?

            As noted above, there is no notice requirement.  See Ochoa-Hernandez, 2010 WL 1340777 at 5. 

5.      Attorney Fees and Costs

The lodestar is the primary method of establishing the amount of reasonable attorney fees in California.  See Consumer Privacy Cases (2009) 175 Cal.App.4^th 545, 556-558.  This amount may be cross-checked against the percentage-of-recovery.  Id.; see also Cundiff v. Verizon California, Inc. (2008) 167 Cal.App.4^th 718, 724, fn. 3 (“Under this method, the trial court first determines a touchstone or lodestar figure based on the “time spent and reasonable hourly compensation of each attorney … involved in the presentation of the case.” (Serrano III, supra, 20 Cal.3d at p. 48.)  Here, the lodestar calculation is as follows.

From Melmed Law Group, P.C. (Melmed Decl., ¶52):

From Ackermann & Tilajef, P.C. (Ackermann Decl., ¶18):

The number of hours spent (and to be spent) on the various tasks appear to be reasonable for this case.  (Melmed Decl., ¶¶52-58.)  The hourly rates charged also appear to be reasonable and in line with prevailing rates in the community.  Accordingly, the attorney fees of $62,959.60 and $9,377.60 for the Melmed Law Group, P.C. and Ackermann & Tilajef, P.C. law firms, respectively, can be deemed the lodestar.  This totals $72,337.20.  (Mot. at p.28.)

The fee splitting agreement between Plaintiff’s counsel is as follows: 50% to Ackermann & Tilajef, P.C. and 50% to Melmed Law Group P.C.  (Ackermann Decl., ¶20.)  Counsel states that Plaintiff has approved the fee-splitting agreement.  (Id.) 

Counsel requests reimbursement of costs in the amount of $12,787.75, of which $6,678.38 was expended by the Melmed Law Group, P.C. and $6,109.37 expended by Ackermann & Tilajef, P.C.  (Melmed Decl., ¶62, Ex. 5; Ackermann Decl., ¶19.)  The costs listed appear to be reasonable and necessary to the litigation.  They are also less than the $14,000 settlement cap.  The Court awards counsel’s actual costs of $12,787.75.

6.      Service Award to PAGA Representative

The Settlement Agreement provides for a service award of up to $7,500 for Plaintiff as the PAGA representative. In the submitted declaration, Plaintiff states that she was employed by Defendant as an hourly-paid non-exempt employee and was not paid all minimum or overtime wages, provided off-duty meal periods, or paid missed meal period premiums, or issued accurate wages statements.  (Beltran Decl., ¶3.)  Plaintiff states that she provided invaluable assistance to PAGA Counsel and the Aggrieved Employees in this case by participating in lengthy interviews and phone conferences over a period lasting several months, including discussion related to evaluating my claims that Defendant failed to pay wages; searching for and producing relevant documents; reviewing pleadings in the case; reviewing documents and data provided by Defendant; keeping in contact with her attorneys regarding the status of the case; participating in 2 full-day mediations; and reviewing the settlement documents. (Id., ¶4.)  She believes her efforts in bringing this case were instrumental to the favorable terms of the settlement.  (Id., ¶5.) She states that “this case involved risks for me, such as the risk of having to pay costs if we lost. I also recognized the risk that by putting my name on a lawsuit, I might gain a reputation that would make it harder for me to find employment in the industry in which I work. Others were afraid to bring forth the claims that I brought in this case, but I disregarded those fears and proceeded to bring this Representative Action case. Disregarding the significant risks, both financial and reputational, I pursued this case on behalf of the Aggrieved Employees to a successful resolution and settlement.”  (Id., ¶6.)

In view of the PAGA representative’s declaration, the Court finds that the $7,500 amount appears to be a reasonable inducement for Plaintiff’s participation in this case.

7.      Settlement Administrator Costs

The Settlement Agreement contemplates settlement administration costs not to exceed $10,000.  According to Exhibit 6 of the Melmed declaration, ILYM Group, Inc. provides a document stating that the total case estimate is not to exceed $3,500.  The document includes a breakdown of costs including case startup ($1,038.70), distribution ($1,486.30), and case conclusion ($975), which totals $3,500.  (Melmed Decl., Ex. 6.) 

As such, the total amount that will be awarded for the settlement administration costs shall be $3,500.

CONCLUSION AND ORDER

            The motion for approval of the PAGA settlement is granted.  The Court hereby:

(1)         Grants approval of the settlement as fair, adequate, and reasonable;

(2)         The Gross Settlement Amount shall be $250,000 payable by Defendant;

(3)         Awards $72,337.20 in attorney fees to PAGA Counsel, Melmed Law Group, P.C. and Ackermann & Tilajef, P.C.;

(4)         Awards $12,787.75 in litigation costs to PAGA Counsel;

(5)         Awards $7,500 as a PAGA Representative Enhancement Award to Plaintiff Christina Beltran;

(6)         Awards $3,500 in settlement administration costs to ILYM Group, Inc.;

(7)         The Net Settlement Amount shall be $153,875.05 ($250,000 GSA - $72,337.20 attorney’s fees - $12,787.75 costs - $7,500 enhancement award - $3,500 settlement administration costs). 

(8)         Approves payment of $115,406.29 (75% of $153,875.05 NSA) to the LWDA;

(9)         Approves the PAGA Aggrieved Employment Payment amount to be $38,468.76 (25% of $153,875.05 NSA), which will be paid to the Aggrieved Employees pursuant to the terms of the Settlement Agreement;

(10)     Orders Counsel to update the proposed Notice (attached as Exhibit A to the Settlement Agreement) to conform to this Order; 

(11)     Orders Counsel to lodge a proposed Judgment, consistent with this ruling and containing the PAGA Aggrieved Employees definition and full release language, by October 7, 2022;

(12)     A Non-Appearance Case Review re: Status and Distribution of Settlement Funds is set for January 11, 2023 at 8:30 a.m.  A Status Report is to be filed by January 3, 2023.