Judge: Joseph Lipner, Case: 21STCV19484, Date: 2023-12-19 Tentative Ruling

Case Number: 21STCV19484    Hearing Date: December 19, 2023    Dept: 72

SUPERIOR COURT OF CALIFORNIA

COUNTY OF LOS ANGELES

DEPARTMENT 72

TENTATIVE RULING

Plaintiff Diana Lopez moves for an order approving the settlement in this PAGA case.

The Court DENIES WITHOUT PREJUDICE Plaintiff’s motion so that Plaintiff may (1) notify LWDA of the proposed settlement and submit proof of such notice to the Court, and (2) clarify its distribution formula for the individual employees.

Background

Plaintiff was employed by Defendant White Memorial Medical Center (“Defendant”) beginning in 2018.

The main claims in this case are that non-exempt employees were not paid for ‘waiting time’ while going through Covid-19 clearance prior to starting their shifts and that case managers were not given meal and rest breaks.

Plaintiff filed this action on May 24, 2021, seeking civil penalties against Defendant under the PAGA. In particular, the Complaint alleges (a) failure to pay for non-exempt employees time spent on Covid-19 screening; (b) failure to provide meal breaks; (c) failure to provide rest breaks; (d) failure to promptly pay wages upon termination; (e) failure to provide accurate wage statements; and (f) failure to pay overtime wages.

On January 31, 2023, the parties engaged in mediation, but were unable to reach a settlement.

On May 5, 2023, Defendant filed a motion for summary judgment or, in the alternative, summary adjudication. Plaintiff filed an opposition on July 6, 2023.

The parties subsequently reached a settlement agreement. The class of Aggrieved Employees covered by the settlement includes all nonexempt employees, who were classified as hourly, employed by Defendant from March 16, 2020 March 20, 2020, through October 17, 2022.

On November 29, 2023, Plaintiff filed this motion for approval of the settlement. No party objected or filed an opposition.

Legal Standard

Settlement

The PAGA is “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.” (Amalgamated Transit Union, Local 1756, AFL-CIO v. Superior Court (2009) 46 Cal.4th 993, 1003.)  The statute provides a mechanism for private enforcement of Labor Code violations for the public benefit. (See Arias v. Superior Court (2009) 46 Cal.4th 969, 986; Ochoa-Hernandez v. Cjaders Foods, Inc. (N.D.Cal. 2010) 2010 WL 1340777, at p. *4.)   

To incentivize employees to bring PAGA actions, the statute provides aggrieved employees 25 percent of the recovered civil penalties. (Lab. Code § 2699, subd. (i).) The remaining 75 percent is distributed to the Labor and Workforce Development Agency (“LWDA”) “for enforcement of labor laws and education of employers and employees about their rights and responsibilities under [the Labor Code].” (Id.) 

In reviewing the terms of a settlement agreement, courts determine whether the settlement is fair, reasonable, and adequate to all concerned, and not the product of fraud, collusion, or overreaching. (Reed v. United Teachers Los Angeles (2012) 208 Cal.App.4th 322, 337; Nordstrom Commission Cases (2010) 186 Cal.App.4th 576, 581.) Although a PAGA plaintiff need not satisfy class action requirements (see Arias v. Superior Court (2009) 46 Cal.4th 969, 975), general principles applicable to class action settlements apply equally in this context. In the context of a class action settlement, courts consider various factors including whether (1) the settlement is the result of 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. (Nordstrom, supra, 186 Cal.App.4th at 581; Wershba v. Apple Computer, Inc. (2001) 91 Cal.App.4th 224, 245.) The final factor is not applicable to PAGA. (See Arias, supra 46 Cal.4th at p. 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”].)

In considering the amount of settlement, courts must be mindful that compromise is inherent and necessary in the settlement process. (Wershba, supra, 91 Cal.App.4th at 250.) 

A proposed PAGA settlement must be submitted to LWDA at the same time that it is submitted to the court for review and approval.  (Lab. Code § 2699, subd. (l)(2).)

Attorney’s Fees Under Settlement

California Rules of Court, rule 3.769(b) requires that “[a]ny agreement… with respect to the payment of attorney fees or the submission of an application for the approval of attorney fees must be set forth in full in any application for approval of the dismissal or settlement of an action that has been certified as a class action.” Despite any agreement by the parties to the contrary, “the court ha[s] an independent right and responsibility to review the attorney fee provision of the settlement agreement and award only so much as it determined reasonable.” (Garabedian v. Los Angeles Cellular Telephone Co. (2004) 118 Cal.App.4th 123, 128.)

Discussion

Notice to LWDA

Plaintiff have not shown that the proposed settlement was submitted to LWDA. For this reason, the Court continues the motion so that Plaintiff may notify LWDA of the proposed settlement and submit such notice to the Court.

Fairness of Settlement

The gross settlement amount is $1,050,000.00.

Under the settlement, several quantities will be deducted from the gross amount:

(1) Up to $15,950.00 in administration costs to ILYM Group Inc. to administer the settlement;

(2) Up to $12,000.00 in litigation costs to Sottile Baltaxe, Plaintiff’s counsel;

(3) Up to $346,500.00 in attorney’s fees to Sottile Baltaxe; and

(4) Up to $2,500.00 as a service award to Plaintiff.

Following these deductions, the remaining settlement amount would be roughly $673,050.00.

Of the remaining amount, referred to as the “PAGA Penalties Fund”, 75% will be paid to the LWDA and 25% will be paid to all Aggrieved Employees.

The formula by which the 25% of the fund will be distributed to individual Aggrieved Employees is unclear. Plaintiff characterizes it as follows:

i. Employees Other Than Care or Case Managers: Individual Aggrieved Employee Settlement Payment= [twenty-five percent (25%) of PAGA Penalties Fund] x ([Pay Periods Worked by Individual Aggrieved Employee During the Settlement Period x (1,0 if the Individual Aggrieved Employee was never a Care or Case Manager during the Settlement Period]);

or

ii. Care or Case Managers: Individual Aggrieved Employee Settlement Payment= [twenty-five percent (25%) of PAGA Penalties Fund] x ([Pay Periods Worked by Individual Aggrieved Employee During the Settlement Period x (1.1 if the Individual Aggrieved Employee was a Care or Case Manager during the Settlement Period]).

(Motion at p. 4:12-25.)

This formula does not make sense. Taken at face value, it suggests that each individual payment made would be well in excess of 25% of the PAGA Penalties Fund, which is a mathematical impossibility. It appears that Plaintiff intended some kind of distribution based on the proportion of pay periods worked and whether the employee was a case manager. However, it is unclear how these numbers are actually going to be worked into the distribution. The Court could attempt to discern what Plaintiff actually intended, but that would be an exercise in guesswork, which cannot support an approval of the settlement.

It otherwise appears the factors supporting a presumption of fairness are present. The settlement agreement contains an acknowledgment that the settlement was reached at arm’s length with a summary judgment motion pending. (Baltaxe Decl. ¶¶ 62-63, Exh. 1 at p. 8.) Substantial discovery was conducted; Plaintiff served Employment Form interrogatories, two sets of Special Interrogatories, and two sets of Requests for Production of Documents on Defendant, which Defendant responded to. (Baltaxe Decl. ¶¶ 34-35.) Following the mediation, where Defendant asserted unexpected facts regarding changes to the Covid-19 screening program, Plaintiff took the deposition of Arlene Lara, the person who was in charge of the screening program. (Baltaxe Decl. ¶¶ 38-50.) Finally, counsel for Plaintiff has practiced for 36 years and has extensive experience in employment litigation. (Baltaxe Decl. ¶¶ 6-20.)

However, the serious lack of clarity as to how the settlement will be distributed muddies the presumption of fairness. The Court therefore continues this motion so that Plaintiff can clarify the formula for the individual employees.

The attorney’s fees in the settlement, $346,500.00, is 33% of the total recovery.  It is higher than the lodestar of $148,360.  This may be appropriate under the facts of this case, but the Court will need to consider the issue once it fully understands the payments to the individual employees.