Judge: Kristin S. Escalante , Case: 22STCV34864, Date: 2023-05-10 Tentative Ruling

Case Number: 22STCV34864    Hearing Date: May 10, 2023    Dept: 24

The Motion re: FOR APPROVAL OF PAGA SETTLEMENT, AWARD OF ATTORNEYS FEES AND COSTS, AND SETTLEMENT ADMINISTRATION COSTS; MEMORANDUM OF POINTS AND AUTHORITIES IN SUPPORT THEREOF filed by Plaintiff Sindy Aviles on 04/14/2023 is continued to (to be discussed at hearing)--- at 8:30 a.m. in Department 24 of Stanley Mosk Courthouse.

Plaintiffs are to provide the court with (1) a copy of the email from LWDA confirming the submission of the proposed settlement, (2) the notice they will send to the Aggrieved Employees referenced in the settlement, and (3) an explanation of whether or how the Administrator will confirm the addresses for Aggrieved Employees are up to date.

Plaintiffs Sindy Aviles and Bryan Kelly (collectively “Plaintiffs”) move for an order approving their PAGA settlement and Release Agreement (“Settlement”) with Defendant Freeway Insurance Services America, LLC (“Defendant”). (Mtn, at pp. 2-3.) Specifically, Plaintiffs request the court issue an order: (1) approving the parties’ Gross Settlement Amount of $320,000.00, (2) approving Plaintiffs’ Counsel’s attorneys’ fees for $106,666.66 (1/3 of the settlement) and litigation costs of $3,895.07; (4) approving payment of the settlement administration costs of $9750.00 to CPT Group or any other neutral third-party administrator (“Administrator”); and (5) designating the remainder of the payment in the amount of $199,754.43 the Net Settlement Amount to be allocated between the LWDA (75% or $149,815.83) and Aggrieved Employees (25% or $49,938.61).

In September 2021, Plaintiffs filed their initial complaint in the instant action alleging once cause of action for civil penalties under Labor Code section 2698 et seq. against Defendant. The filed the operative second amended complaint (“SAC”) in January 2023.

Plaintiffs alleged individual violations of Labor Code §§ 201-04, 210, 218.6, 221, 226, 226.2, 226.3, 226.7, 246, 510, 512, 558, 558.1, 1174, 1174.5, 1194 et seq., 1197 et seq., 1197.1, 1198, 1198.5, 1199, 2800, 2802, 2804, 2698-2699, 2699.3, 2699.5 (SAC, ¶39.) On March 9, 2022, Plaintiffs provided notice to the Labor and Workforce Development Agency (LWDA) of Defendant’s Labor Code violations through certified mail. (SAC., ¶38.)

On April 14, 2023, Plaintiffs filed a motion for approval of settlement and attached the PAGA Settlement Agreement and Release.

Discussion

“The superior court shall review and approve any settlement of any civil action filed pursuant to this part. The proposed settlement shall be submitted to the [Labor & Workforce Development Agency (“LWDA”)] at the same time that it is submitted to the court.” (Lab. Code, § 2699, subd. (l)(2).) As a threshold matter, Plaintiffs submitted evidence the parties complied with Labor Code Section 2699 subdivision (l)(2) by submitting the declaration of Jonathan Genish stating Plaintiffs sent a copy of the proposed settlement on April 14, 2023, which confirms receipt of the proposed Settlement. (Genish Decl., ¶18.) Plaintiffs do not include a copy of the email from LWDA confirming the submission.

The settlement defines “Aggrieved Employees” as “all employees who were employed by defendant Freeway Insurance Services America, LLC as a non-exempt employee in California during the PAGA period.” (Genish Decl., ¶14, Ex. B at p. 3.) The parties defined the PAGA Period at “December 16, 2020, through September 30, 2022.” (Genish Decl., ¶14, Ex. B at p. 4.)

Defendant employed Plaintiffs during the PAGA period—it hired Aviles January 2020, and she still works there; it hired Kelly from January 2019 until July 2021. (SAC, ¶¶17, 18; Genish Decl., ¶8.) Plaintiffs alleged that throughout this period Defendant subjected them and other employees to Labor Code violations. The statute of limitations on Plaintiff’s claims was one year. (Code Civ. Proc., §340, subd. (a).) Plaintiffs filed their initial suit on September 22, 2021, and concurrently provided notice to the LWDA of Defendant’s Labor Code, which tolled the statute of limitations for their PAGA claims while they awaited a response. (Genish Decl., ¶6, Ex. A., at p. 1.) Accordingly, the claims were plead timely within the statutory period and in accordance with the LWDA notice.

A superior court must review and approve any penalties sought as part of a proposed settlement agreement pursuant to Labor Code §2699(l). “If, at the time of the alleged violation, the person employs one or more employees, the civil penalty is one hundred dollars ($100) for each aggrieved employee per pay period for the initial violation and two hundred dollars ($200) for each aggrieved employee per pay period for each subsequent violation.” (Lab. Code §2699(f)(2).) A prevailing employee is entitled to an award of reasonable attorney fees and costs incurred in the action (Lab. Code §2699(g)(1).) “[C]ivil penalties recovered by aggrieved employees shall be distributed as follows: 75 percent to the [LWDA] for enforcement of labor laws and education of employers and employees about their rights and responsibilities under this code to be continuously appropriated to supplement and not supplant the funding to the [LWDA] for those purposes; and 25 percent to the aggrieved employees.” (Lab. Code §2699(i).)

Plaintiffs have provided the Court with sufficient information to approve the Settlement terms, as discussed below.

Plaintiffs provided the court with a copy of the Settlement and the initial LWDA letter. (Genish Decl. ¶¶ 9, 14, Ex. A [Initial LWDA Letter], Ex. B [Settlement].)

Genish declares Plaintiffs engaged an investigation, informal7 discovery, records review, and arm-length negotiation. (Genish Decl., ¶¶12-15.) As part of the investigation Plaintiffs exchanged data with Defendant relating to the alleged underlying violations. They then used the information to determine the relevant statutory period, the number of affected employees, and the number of relevant pay periods. Armed with that knowledge Plaintiffs constructed a damages model which Defendant disputed. As such, Genish further assessed the strength of the claims. Based on Genish’s experience, the degree of investigation, and the amount of information obtained the model was sufficient to determine the value of the PAGA claim. The moving papers state the anticipated size of Aggrieved Employees is 1,007, the aggregate pay periods are 17,2600, leading to a maximum possible liability of $1,726,000. (Genish Decl., ¶¶ 29). Plaintiffs argue in the briefing that this was a highly disputed case as the parties dispute the impact Viking River Cruises had on the Plaintiffs’ abilities to pursue claims. They also provide Defendant’s arguments in defense of the allegations—e.g., they maintained compliant employment policies, the penalties would have been lower etc. Plaintiffs also argue the settlement was appropriate given the contested components of the case, the strength and weaknesses of each side, and the realistic range of recovery.

The totality of explanation is sufficient.

The Settlement provides that Defendant will pay a Gross Settlement Amount of $320,000.00. The Net Settlement Amount will be adduced by deducting (1) a maximum of $9,750.00 to the Administrator, (2) the litigation costs the court awards to Plaintiff, not to exceed $3,828.90, and (3) the attorneys’ fees the court awards to Plaintiff’s counsel not to exceed $106,666.66 which is equal to 33% of the Gross Settlement Amount. This results in a maximum Net Settlement Amount of $199,754.44, seventy-five percent of which equal to $49,938.61 will be paid to the LWDA and the remaining twenty-five percent of which, equal to $149m815.83 will be paid to the Aggrieved Employees. (Genish Decl., ¶ 14, Ex. B at p. 6.)

Plaintiffs provide the total amount of the settlement and the manner of its distributions.

The aggrieved employee portion “shall be allocated to the PAGA Aggrieved Employee Payment to be paid to the Aggrieved Employees on a pro rata basis based on pay periods worked during the PAGA Period” (Genish Decl., ¶14, Ex. B, at p. 7.) “The Individual PAGA Payments will be treated as nonwage income to the Aggrieved Employees and reported by the Settlement Administrator on IRS Form 1099. (Genish Decl., ¶14, Ex. B, at p. 8.) The settlement checks the Administrator issues to each Aggrieved Employee shall remain valid for one hundred eighty (180) days from the date of issuance. The Settlement provides that for any checks not cashed by the void date, the Administrator will cancel the checks. (Genish Decl., ¶14, Ex. B, at p. 9.) For any checks returned undelivered without a forwarding address, the Administrator will conduct an address search and re-mail the check. (Genish Decl., ¶14, Ex. B, at pp. 9-10.) If the second check is returned, the Administrator need not take further steps to remail the check. For any check which remains uncashed and cancelled after the void date, the Administrator shall “transmit the funds represented by such checks to the California Controller's Unclaimed Property Fund in the name of the Aggrieved Employee.” (Genish Decl., ¶14, Ex. B, at p. 10.)

The Settlement does not include Plaintiffs’ individual releases and their waiver of rights under Civil Code Section 1542, which were negotiated separately. (Genish Decl., ¶17.) It is permissible for Plaintiffs to agree to a section 1542 waiver in connection with their own claims, but improper for Plaintiffs to enter a waiver on behalf of the represented employees. (Moniz v. Adecco USA, Inc. (2021) 72 Cal.App.5th 56, 86.) Accordingly, Plaintiffs have properly limited the section 1542 waiver.

The Settlement includes a release for Aggrieved Employees which states as follows:

[i]n exchange for the consideration recited in this Settlement Agreement, upon approval of the settlement by the Court as set forth herein and funding in full of the Gross Settlement Amount by Defendant, Plaintiffs, as representatives for the State of California and all Aggrieved Employees, and on behalf of their current, former, and future heirs, executors, administrators, attorneys, agents, and assigns, will forever completely release and discharge the Released Parties of any and all Released Claims. The Aggrieved Employees and the State of California are deemed by operation of the Final Order and Judgment to have agreed not to sue or otherwise make a claim against any of the Released Parties for any Released Claims.

(Genish Decl., ¶14, Ex. B, at p. 8.) Separately, the parties define released claims as:

all PAGA claims that were or reasonably could have been alleged against Defendant in the Action on behalf of the Aggrieved Employees based on the facts or claims alleged in the Action and/or in the Plaintiffs’ LWDA Notices. Without limiting the foregoing, and in addition to the foregoing, the release includes all claims and civil penalties under California Labor Code Sections 2699 et seq., attorneys’ fees and costs, and interest arising out of the claims at issue, for Defendant’s alleged failure to: provide meal periods; provide rest breaks; pay minimum wages; pay and properly calculate overtime wages; properly calculate the regular rate of pay including with respect to meal period and rest break premiums and sick time; furnish accurate itemized wage statements; properly calculate and pay wages for all hours worked; pay all wages due at separation of employment; separately compensate for rest breaks at the correct rate of pay; properly compensate employees for all non-productive time including rest breaks; timely pay all wages due during employment and upon separation; maintain accurate payroll records; and reimburse for all necessary business-related expenses, pursuant to the corresponding alleged violations of California Labor Code sections 201-204, 210, 218.5, 218.6, 221, 226, 226.2, 226.3, 226.7, 246, 510, 512, 558, 558.1, 1174, 1174.5, 1194 et seq., 1197 et seq., 1197.1, 1198, 1198.5, 1199, 2800, 2802, 2804, 2698-2699, 2699.3, 2699.5, and the applicable IWC Wage Order provisions.

(Genish Decl., ¶14, Ex. B, at pp. 4-5.) The settlement is appropriately tailored to the PAGA claims of the aggrieved employees. The Settlement states that the release occurs “upon approval of the settlement by the Court as set forth herein and funding in full of the Gross Settlement Amount by Defendants.” (Genish Decl., ¶14, Ex. B, at p. 8.) Thus, the release becomes effective after the Settlement’s “effective date” defined as the later of either “(i) the 61st day after service of notice of entry of the Final Order and Judgment, if no appeal, review, or writ has been filed; or (ii) if an appeal, review, or writ is sought from the Final Order and Judgment, the day after the Final Order and Judgment is affirmed or the appeal, review, or writ is dismissed or denied, and the Final Order and Judgment are no longer subject to further judicial review.” (Genish Decl., ¶14, Ex. B, at p. 3.) [the release does not explicitly state it is effective upon funding, but states that the release is in exchange for the consideration and happens “upon” the funding. This appeared sufficiently clear that the release was not occurring prior to funding, but if you disagree then you could request the parties explain or modify when the release is effective.]

The Aggrieved Employee release covers “all PAGA claims that were or reasonably could have been alleged against Defendant in the Action based on behalf of the Aggrieved Employees based on the facts or claims alleged in the Action and/or in the Plaintiff’s LWDA notices.” (Genish Decl., ¶14, Ex. B., at p. 4.) The Settlement release terms appropriate limit the release to the PAGA claims and provide examples of the various Labor Code section applicable. However, the court may not approve settlement of PAGA claims which are not included in the notice to the LWDA. (Uribe v. Crown Bldg. Maintenance Co. (2021) 70 Cal.App.5th 986, 1005.) The court’s review of the PAGA notice provided to the LWDA demonstrates that some of the exemplar code section listed in the release are not included in the PAGA Notice. (Genish Decl., ¶¶9, 14, Ex. B., at p. 5; Ex. A.) Considering the inconsistency, the court requests the parties either submit an explanation as to why the extra code sections are appropriately included in the settlement agreement or amend the settlement to exclude the additional code sections not provided in the LWDA notice.

As prevailing employees, Plaintiffs are entitled to reasonable attorneys’ fees in this action. (Lab. Code §2699(g)(1).) As discussed above, the Settlement provides for attorneys’ fees in the amount not in excess of $106,666.66 (Genish Decl., ¶14, Ex. B at p. 6.) In the motion, Plaintiffs argue that this amount is appropriate as a percentage of the total recover because it is a better approximates the workings of the marketplace for representative actions. In particular, a small fee-based award may chill the private enforcement essential to the vindication of legal rights. Additionally, Plaintiffs argue the award is appropriate given contingency nature of the litigation. The court finds the attorneys’ fees award is supported.

The settlement also provides for an award of costs incurred in the amount not to exceed $3,895.07. (Genish Decl., ¶ 43.) Counsel attaches an itemized list of costs to his declaration. (Genish Decl., ¶44, Ex. C.) In the motion Plaintiffs argue the costs were those which both Plaintiffs’ counsel collectively expended, and which were necessary in their prosecution of the matter. The court finds the amount appropriate and narrowly tailored upon reviewing the itemized list of expenses. Additionally, Genish’s declaration provides sufficient support demonstrating Plaintiffs incurred costs, therefore, the court finds the requested costs are reasonable and supported.

The Settlement provides that the designated Administrator will be responsible for settlement administration. Within 7 days of the Effective Date, the Administrator shall send Defendant’s counsel electronic wiring instructions to fund the Gross Settlement Among and within 10 days of the effective date, Defendant will provide the Administrator with the aggrieved employee data including the employees name, social security number, last known address, and the number of pay periods credited to each employee. (Genish Decl., ¶14, Ex. B, at p. 9.) Within 21 days of the Effective Date, Defendant will deposit the Gross Settlement Amount to the Administrator. Within 45 days, the Administrator will issue all payments required. The Settlement does not state how or if the Administrator will confirm the addresses for Aggrieved Employees are up to date initially. The Administrator will provide the Aggrieved Employees with an explanatory letter of the Settlement (Notice Letter) along with their settlement check. (Genish Decl., ¶14, Ex. B, at p. 9.) Plaintiffs do not provide the court with the notice they will send to the Aggrieved Employees referenced in the settlement. Accordingly, the court cannot determine if the Notice Letter accurately and fairly describes the settlement.

The Settlement indicates that the Parties would apply to the Court for the entry of an order and final judgment approving the Settlement. (Genish Decl., ¶14, Ex. B, at p. 8.) The Settlement states that the parties wish for the court to retain jurisdiction over the Settlement. (Genish Decl., ¶15, Ex. B, at p. 11; See also Code Civ. Prod. §664.6.) The Settlement requires Plaintiffs comply with Labor Code section 2699 subdivision (l), though it does not explicitly state that Plaintiffs are to provide the LWDA of notice of the order approving the Settlement as required. Nevertheless, the court finds the statement agreeing to compliance with Labor Code section 2699 subdivision (l) sufficient.

Moving party is directed to give notice.