Judge: Joseph Lipner, Case: 22STCV07259, Date: 2023-12-28 Tentative Ruling

Case Number: 22STCV07259    Hearing Date: December 28, 2023    Dept: 72

ASUPERIOR COURT OF CALIFORNIA

COUNTY OF LOS ANGELES

DEPARTMENT 72

TENTATIVE RULING

Plaintiff Haydee Leon (“Plaintiff”) moves for an order approving the settlement in this PAGA case.

The Court DENIES Plaintiff’s motion.  The attorney’s fees, at 40% of the recovery, are too high. 

Background

Plaintiff filed this action on February 28, 2022. The operative complaint is now the Second Amended Complaint (“SAC”), which alleges violation of PAGA for (1) failure to pay all wages; (2) failure to provide meal periods; (3) failure to provide rest periods; (4) failure to reimburse necessary business expenses; (5) failure to timely pay wages due upon termination; and (6) failure to maintain accurate payroll records and issue accurate itemized wage statements.

The SAC names as defendants ALAL, LLC dba KEI-AI LOS ANGELES HEALTHCARE CENTER (“ALAL”); ASPEN SKILLED HEALTHCARE, INC.; SKBM, LLC; ALHL, LLC, dba LODI NURSING & REHABILITATION; ALGT, LLC, dba WOODLANDS HEALTHCARE CENTER; ALGD, LLC, dba STONEBROOK HEALTH AND REHABILITATION; AOTN, LLC, dba OAKLAND HEIGHTS NURSING AND REHABILITATION; APTB, LLC, dba PETALUMA POST-ACUTE REHABILITATION; ASFP, LLC, dba PACIFIC HEIGHTS TRANSITIONAL CARE CENTER; ASCC, LLC, dba RIVERWOOD HEALTHCARE CENTER; AWCY, LLC, dba LA CASA VIA TRANSITIONAL CARE CENTER; AWHC, LLC, dba MISSION PALMS HEALTHCARE CENTER; and SKBM II, LLC (collectively, “Defendants”). However, with the exception of Plaintiff, the settlement in question limits itself to the employees of ALAL.

Plaintiff submitted her PAGA notice of the claims to the Labor and Workforce Development Agency (“LWDA”) on November 22, 2021, and submitted two subsequent notices on January 19, 2022 and August 15, 2023.

On June 3, 2022, Defendants filed a motion to compel arbitration. The parties agreed to mediation afterward. Prior to attending mediation, the parties engaged in informal discovery which included the provision of Defendants’ employment policies and employee handbooks, Plaintiff’s personnel file, time records, and wage statements, and the time and payroll statements for 113 employees. (Alami Decl. ¶ 18.)

Defendants filed a second motion to compel arbitration on March 24, 2023. Defendants withdrew the motion without prejudice on August 10, 2023.

As a result of ongoing mediation, the parties reached a settlement agreement (the “Settlement”) on September 19, 2023.

There is another matter pending before the Los Angeles Superior Court captioned Huerta v. ALAL, LLC, Case No. 23STCV05884, which Plaintiff and Defendants believe concerns similar PAGA claims to those asserted here. Plaintiff and Defendants believe that the proposed settlement in this matter will extinguish the claims in the Huerta action.

          Plaintiff filed this motion for approval of the Settlement on December 5, 2023. Defendants filed a notice of non-opposition on December 28, 2023.

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”].) “Because many of the factors used to evaluate class action settlements bear on a settlement's fairness—including the strength of the plaintiff's case, the risk, the stage of the proceeding, the complexity and likely duration of further litigation, and the settlement amount—these factors can be useful in evaluating the fairness of a PAGA settlement.” (Moniz v. Adecco USA, Inc. (2021) 72 Cal.App.5th 56, 77.) Furthermore, “a trial court should … determine whether [the settlement] is fair, reasonable, and adequate in view of PAGA's purposes to remediate present labor law violations, deter future ones, and to maximize enforcement of state labor laws.” (Ibid.)

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 has shown that the proposed settlement was submitted to LWDA. (Alami Decl. ¶¶ 17, 42, Exh. 5.)

Fairness of Settlement

The parties estimate that there are about 987 Aggrieved Employees that worked for ALAL. (Alami Decl. ¶ 19, Exh. 1 (“Settlement”) at p. 5, section 4.1.) Although the Settlement releases all Defendant’s from Plaintiffs individual claims, the Settlement only covers Aggrieved Employees who worked for ALAL. The period of violations covered by the settlement is November 22, 2020, through the date that the Court approves the settlement (the “PAGA Period”).

The gross settlement amount is $350,000.00.

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

(1) $8,850 in administration costs to Phoenix Class Action Administration Solutions;

(2) $14,963.95 in litigation costs to Alami Law Group and the Law Office of Daniel J. Hyun as counsel for Plaintiff;

(3) $140,000.00 in attorney’s fees to Plaintiff’s counsel; and

(4) $15,000.00 as a representative service payment to Plaintiff.

Following these deductions, the remaining net settlement amount would be roughly $171,186.05

Of the remaining amount, referred to as the “PAGA Penalties Fund”, 75% will be paid to the LWDA and 25%, roughly $42,796.5125, will be paid to all Aggrieved Employees. The portion paid to the Aggrieved Employees will be distributed on a pro rata basis based on each employee’s respective number of pay periods worked for Defendant ALAL during the PAGA Period.

It appears the factors supporting a presumption of fairness are present. The Settlement was the product of over a year of negotiations and mediation. Defendants had filed multiple motions to compel Plaintiff to arbitrate her claims against Defendants, which could have hampered Plaintiff’s ability to litigate the representative claims in court while simultaneously arbitrating her individual claims. Plaintiff also encountered substantial evidentiary issues in her case upon receiving the informal discovery. The rate of pay, rounding, and meal violations, which were the largest portions of the violations, turned out to have only a small impact on the affected employees’ actual pay. Furthermore, these claims were based primarily on anecdotal testimony from witnesses and therefore presented individualized inquiries which would create manageability issues at trial. Thus, in consideration of the significant risks with proceeding with litigation, the settlement amount appears reasonable.

Plaintiff’s representative service payment of $15,000.00 appears unusually large in light of the small size of the settlement to be divided amount nearly a thousand Aggrieved Employees. Further, this payment appears to be based on Plaintiff’s release of all Defendants from her claims, not just ALAL. (Proposed Order ¶¶ 6, 14.)

The attorney’s fees in the settlement, $140,000, make up 40% of the total recovery. It is lower than the lodestar of $170,670, but its portion of the recovery nevertheless is unusually large. Given the recovery and the facts of this case, the Court will not approve a settlement in this amount.