Judge Lon F. Hurwitz, Case 19-01049881 2022-11-21 Tentative Ruling

Judge: Lon F. Hurwitz, Case: 19-01049881, Date: 2022-11-21 Tentative Ruling

Motion for Approval of Class Settlement

OVERVIEW:

This is a putative class action involving alleged wage/hour violations. The operative complaint is the First Amended Complaint which includes seven class claims, and a single cause of action for PAGA penalties.

02/07/19 – Class Action Complaint filed by Plaintiff Erik Arteaga-Reyes against Defendant Dorel Gaboras dba Today’s Construction and Does 1-50. The Complaint contained seven (7) causes of action.

07/16/19 – FAC filed containing 8 causes of action, including a cause of action for PAGA penalties.

11/03/20 – The parties filed a Joint Post-Mediation Status Conference Statement wherein the parties represented that they attended mediation on 08/25/20 and the parties reached a settlement in principal, but needed time to finalize the settlement.

06/11/21 – The instant motion was filed.

09/10/21 – Initial hearing on approval held and continued. (ROA 120.) The Court identified several procedural issues.

12/10/21 – Second hearing and continued based on lack of resolution of two procedural issues identified on 09/10/21. A supplemental declaration was filed purporting to address them.

03/25/22 – Third hearing and continued based on a number of issues. Additionally, Plaintiff requested numerous extensions of the filing deadlines, which explains the long delay since the last hearing. In the end, Plaintiff was to file any supplemental or revised papers and redlines on or before 10/07/22, but failed to do so. A third supplemental declaration was filed 10/25/22 (ROA 179), which includes a second amended settlement agreement.

ANALYSIS:

1. The estimated class size per “Defendant's representation” (¶ 58(h)(ii)) is 174. Please confirm the date this number was estimated. It appears it was provided at mediation. (¶ 51), but Attorney Alemzadeh declares mediation occurred on 02-19-20 (¶ 37) and later declares the mediation occurred 08-25-20 (¶ 51). Regardless, given the passage of time, what is the current estimated class size? Has the escalator clause been triggered? (¶ 58(h)(ii).)

ISSUE. There are 193 class members (and aggrieved employees), but despite the Court’s prior order, counsel does not state here whether the escalation clause has been triggered. However, given the class has increased by 19 individuals (or approximately 10.92%), the escalation clause has been triggered. (Second Amended Settlement (“2AS”) ¶ 59(h)(ii).) Note, counsel does report the escalation clause was triggered later in the declaration.

A review of the redlined settlement (ROA 179 Ex. B) indicates the Parties intend to increase the GSA by $3,000 to account for the increase in class size. This is incorrect. As stated above, the class size has increased by approximately 10.92%. The settlement provides for a proportional increase of the GSA upon trigger of the escalation clause. (2AS ¶ 59(h)(ii) [“Defendant shall not be required to pay mor (sic) than the GSA, as long as the class size as of the date of the sample to Plaintiff does not increase by more than ten percent (10%) (i.e., if the class size increases by eleven percent (11%), the Settlement Agreement shall increase proportionately, i.e., by eleven percent of the GSA), and so forth.”].) In other words, as made clear by the example in the Settlement, once the 10% threshold is triggered, the GSA is increased by the full corresponding amount. Accordingly, the original $300,000 GSA plus 10.92% ($32,760) equals a total GSA of $332,760.

2. Attorney Mahoney describes in general terms that as part of the claims investigation, the review, analysis, and sampling of documents, and independent investigation, resulted in the “full[] evaluat[ion] of the case. (Mahoney Decl. ¶¶ 11–15.) Were actual time records provided to Plaintiff? If so, what percentage of the actual workweeks and class members did the documents represent?

RESOLVED. Counsel reports the sampling was between 17-20% of the Class. Note this is likely based on the initial class size of 174, so the percentage is actually smaller, but in the range of acceptable.

3. Please describe the “independent” investigation of facts and what was discovered. Is it correct no formal discovery was exchanged? What did counsel do to determine the number of class members and workweeks and when were any such efforts undertaken? (Supp. Alemzadeh Decl. ¶¶ 29–35.)

RESOLVED. Formal and informal discovery was exchanged, but it is not clear what information was gleaned from this discovery and counsel fails to address the specifics requested by the Court. It is unlikely that further inquiries will yield adequate responses from this counsel, however, as their lack of diligence is typical of their filings.

4. What is the basis for the discount applied to the Unpaid Wages claim?

RESOLVED. This is explained by reference to “individual issues”. What is not explained is why a particular discount percentage was selected.

5. Regarding the Waiting Penalties claim, counsel states maximum exposure is $144,800, discounted by 50% “would be Three Hundred Seventy-Five Thousand Dollars ($72,400.00)”. (Supp. Alemzadeh Dec. ¶ 55).

RESOLVED. This was a typographical error.

6. Regarding the Reimbursement claim, counsel first states it was discounted then not discounted. Please clarify. (Supp. Alemzadeh Dec. ¶¶ 56–57).

RESOLVED. The claim was not discounted, so this was apparently an error, although the inconsistency is not directly addressed.

7. Regarding the PAGA claim, counsel states maximum exposure was $14,700 based on total workweeks x $100 for the first penalty. (Alemzadeh Dec. ¶ 64). Does this mean the total PAGA workweeks were 147?

RESOLVED. The bottom line is the allocation to PAGA is very small. Counsel’s explanation is non-responsive.

8. What is the current class size, number of aggrieved employees, and applicable workweeks? What information was reviewed in order to obtain accurate and up-to-date information?

ISSUE. Counsel inconsistently declares there are 193 Aggrieved Employees, but later declares there are 170 (Compare 3d Supp. Mahoney Decl. (“Decl.”) ¶ 4 with ¶ 11.) Counsel completely fails to respond to the Court’s inquiry regarding the information reviewed.

9. Workweeks at mediation were 7,097, so $22 per workweek yields recoveries of minimum $22 and $5,896 maximum. (Supp. Alemzadeh Decl. ¶ 12.) The latter assumes 268 total workweeks, which is approximately 5.2 years. The class period begins 02/07/15, so this calculation is through early 2020. Given the class period likely extends through 02-27-22, please provide current estimates.

RESOLVED. Per the 2AS, the Class period runs through 07/26/21, which yields 9,313 workweeks. Note counsel incorrectly declares the class period runs through 07/25/21. (Decl. ¶ 13.)

10. Regarding administration costs, the settlement states “up to the foregoing maximum” (¶ 58(c)), but does not include an amount or cap.

RESOLVED. The 2AS caps administrator fees at $5,500. (2AS ¶ 39.)

11. Please explain and confirm the calculation of the NSA. (Supp. Alemzadeh Decl. ¶ 12.) Counsel states it is $156,500, but the proposed disbursements appear to result in $142,500.

RESOLVED. The variance was due to the unstated cap on administration fees.

12. Per the Settlement (¶ 58(h)(i)), “Individual Settlement Payments shall be paid pursuant to the formula set forth in Paragraph 59(a)-(h).” However, no such formula (or subsections) are included in Paragraph 59.

RESOLVED. Settlement has been amended to provide formulas for class and PAGA payments.

13. Regarding tax treatment, 10% as wages, 90% as penalties and interest. (Suppl. Alemzadeh Decl. ¶ 58(h)(i).) Why is this allocation made in light of the valuation attributing more than 50% of the total discounted exposure to wages?

ISSUE. Counsel fails to provide an explanation.

14. Settlement ¶ 18, Funding Payments, refers to a “schedule in paragraph 59.” This is incorrect and appears it should be paragraph “69.”

RESOLVED. Counsel does not address this in the declaration, but the 2AS shows the correction.

15. Regarding any uncashed checks, in the event funds cannot be transferred to the State Controller’s Office – Unclaimed Wage Fund (¶ 71), they will be transferred to a cy pres, California CASA. Under what circumstances would this inability to transfer occur? What is the reason for the selection of the cy pres?

ISSUE. Counsel has not provided an adequate response. The settlement provides for the distribution to the unclaimed property fund and, failing that, a cy pres. As the prior order inquired, under what circumstances would distribution to the unclaimed property fund fail? There is no need to include a cy pres here. The Court should not approve the settlement in this form. Additionally, while Plaintiff’s counsel declares he has no affiliation with the cy pres, there is no evidence supporting a conclusion that Plaintiff or Defendant has no such affiliation.

16. As to the release, it needs to be greatly simplified and track what was alleged in the FAC or could have been alleged based on the factual allegations. A separate release for PAGA claims should be included. The releases should align with the express labor code provisions in the LWDA letter and the allegations in the Complaint. Counsel is cautioned that the Court will not approve a Release that extends beyond the claims which were alleged in the Complaint or which could have been alleged, based on the facts asserted therein. Additionally, the release should not include a Section 1542 waiver by the class and the Final Judgment will not include an injunction.

ISSUE. The release is still too broad. See the Court’s prior minute order.

The following language should be deleted from ¶ 40: “claims for restitution and other equitable relief, liquidated damages, civil penalties, statutory penalties, punitive damages, waiting time penalties, interest.”; “or different right of duty”. In the final sentence, “all” should be revised to read “such.” Additionally, the Settlement states it applies to “all [class] claims arising at any point between February January 22, 2018 through July 2, 2021].” This is inconsistent.

As to the PAGA Release it is overbroad in that it purports to includes “all claims arising at any point between January 22, 2018 through July 26, 2021.”

17. The Settlement purports to provide a general release as to Plaintiff, but the general release appears to apply to the class as a whole. (Settlement ¶¶ 40, 58(d).)

RESOLVED.

18. Are there any other matters, whether individual, class, or PAGA, pending or in the pre-filing LWDA stage, that would be affected by approval of this settlement?

ISSUE. It is unknown whether Defendant is aware of such actions.

19. As to the Notice:

NOTE: Counsel fails to direct the Court to the specific provisions that have been revised to address the Court’s concerns.

a. The release is carried over from the Settlement and thus suffers from the same issues identified above.

ISSUE. Same issues identified above.

b. As with the Settlement, there should be a separate PAGA release.

ISSUE. While this is included, it is overbroad. See above.

c. Does the notice require a translation into a language other than English?

ISSUE. Counsel fails to respond to this inquiry.

d. Counsel should provide a form for objections.

ISSUE. No form has been provided for the Court’s review.

e. The section on objections confusingly refers to faxing the “Exclusion.” (p. 5.)

RESOLVED. They will apparently accept exclusions in this form.

f. Notice incorrectly refers to Dept. CX101. (p.5.)

ISSUE. It still refers to CX101.

g. The URL (pp. 5, 6) for the Court needs to be corrected: https://ocjustice.occourts.org/civilwebShoppingNS/Login.do

RESOLVED.

h. The settlement agreement states the check cashing period is 180 days, but the notice says 150. (pp. 4–5.)

RESOLVED. This is 180.

i. The Notice states costs in the amount of $20,000, but that figure does not appear in the Settlement. (p. 3.)

RESOLVED. (¶ 59(b).)

20. Are there any referral or fee-sharing agreements related to this case?

RESOLVED. None.

21. As to the Proposed Order (ROA 94):

NOTE: Here again, counsel simply refers to a newly-filed proposed order without explaining how the various issues have been addressed.

a. It should cite to the ROA number of the operative Settlement Agreement and any amendments and the Notice and forms should be attached as an exhibit.

ISSUE. The Settlement is not identified by ROA number. The objection form purportedly attached as an exhibit has not been provided for the Court’s review.

b. The Class period is defined solely as date of preliminary approval, but the Settlement provides for alternative (and more likely) date. (¶ 2.)

RESOLVED.

c. The Court does not grant “preliminary approval” of any proposed disbursements; those are addressed at Final Approval. (¶ 3.)

RESOLVED. Deleted.

d. Paragraph No. 4 is verbose and can be simplified by deleting everything after the first sentence.

RESOLVED.

e. Paragraph 5 is unnecessary and should be deleted.

RESOLVED.

f. The Notice and the exclusion and objections forms should be attached as an exhibit to the proposed order.

ISSUE. While purportedly done, the Court has never reviewed the objection form.

g. The second sentence of paragraph 10 is unnecessary and should be deleted.

RESOLVED.

h. Paragraphs 11–14 are unnecessary and should be deleted.

RESOLVED.

j. (sic) Paragraph 15 refers to more than one class representative. Additionally, the last sentence of paragraph 15 should be deleted.

ISSUE. This still refers to the non-existent plural “Class Representatives.”

k. Please propose a date for the hearing and briefing re Final Approval.

ISSUE. Counsel proposes a final approval hearing date of “January 20, 2022 at 8:30 a.m.”

l. Paragraph 18 is unnecessary and should be deleted.

RESOLVED.

RULING:

Before the Court this day is the fourth attempt to obtain preliminary approval of the settlement of a putative class action involving alleged wage/hour violations and a cause of action for PAGA penalties.

Most recently, this matter was continued on 03-25-22 so that counsel could address number of issues identified by the Court. (ROA 141.) After numerous extensions, Plaintiff was to file any supplemental or revised papers and redlines on or before 10/07/22, but failed to do so. Supplemental papers, including second amended settlement agreement was filed 10/25/22. (ROA 179)

Having reviewed the supplemental papers, the Court finds counsel has failed to address numerous issues previously identified by the Court and the matter is therefore CONTINUED to Feb. 03, 2023 at 1:30 pm in Department CX103 so that counsel can address the issues identified herein. It is not necessary for Plaintiff to resubmit briefing which has already been filed with the court. Supplemental declarations or other supplemental materials addressing the identified issues with pin citations to the evidence (as opposed to citation to, e.g., the whole of the revised Notice) shall be filed no later than 14 calendar days prior to the continued hearing date. If a revised settlement, proposed Class Notice, and Proposed Order are submitted, redlined versions showing all changes, deletions, and additions must be submitted electronically to the Court.

The Court notes that counsel’s continued failure to fully address and resolve the issues previously identified by the Court will weigh heavily on any award of attorney’s fees in this matter.

1. As there are 193 class members, which is an increase of 19 individuals (or approximately 10.92%), the escalation clause has been triggered. (Second Amended Settlement (“2AS”) ¶ 59(h)(ii).)

A review of the redlined settlement (ROA 179 Ex. B) indicates the parties intend to increase the GSA by $3,000 to account for the increase in class size. This calculation is incorrect.

As the class size has increased by approximately 10.92%, the settlement provides for a proportional increase of the GSA. (2AS ¶ 59(h)(ii) [“Defendant shall not be required to pay mor (sic) than the GSA, as long as the class size as of the date of the sample to Plaintiff does not increase by more than ten percent (10%) (i.e., if the class size increases by eleven percent (11%), the Settlement Agreement shall increase proportionately, i.e., by eleven percent of the GSA), and so forth.”].) (emphasis added) In other words, as made clear by the example in the Settlement, once the 10% threshold is triggered, the GSA is increased by the full corresponding amount of that overage. Accordingly, the original $300,000 GSA plus 10.92% ($32,760) equals a total GSA of $332,760.

2. Counsel inconsistently declares there are 193 Aggrieved Employees, but later declares there are 170 (Compare 3d Supp. Mahoney Decl. (“Decl.”) ¶ 4 with ¶ 11.) Counsel also fails to respond to the Court’s inquiry regarding the information reviewed to determine class and PAGA membership and workweeks.

3. Counsel has failed to explain the rationale behind tax treatment, given the Court’s prior observation that the valuation attributed more than 50% of the total discounted exposure to wages.

4. Regarding the cy pres, counsel has not provided a response to the Court’s concern. The settlement provides for the distribution to the state’s unclaimed property fund and, failing that, a cy pres. Per the prior order, counsel must address under what circumstances would distribution to the unclaimed property fund fail. In the Court’s view, there is no need to designate a cy pres under these circumstances. Additionally, while Plaintiff’s counsel declares he has no affiliation with the cy pres, there is no evidence regarding Plaintiff’s or Defendant’s affiliation.

5. As to the releases, they are still overbroad as indicated in the prior order as well as containing numerous drafting errors.

The following language should be deleted from ¶ 40: “claims for restitution and other equitable relief, liquidated damages, civil penalties, statutory penalties, punitive damages, waiting time penalties, interest.”; “or different right of duty”. Additionally, in the final sentence, “all” should be revised to read “such.” Additionally, the Settlement states it applies to “all [class] claims arising at any point between February January 22, 2018 through July 2, 2021].” This is inconsistent.

As to the PAGA Release it is overbroad in that it purports to include “all claims arising at any point between January 22, 2018 through July 26, 2021.”

The issues with the releases apply with equal force to the notice as well, which incorporate them.

6. As to other matters that may be affected by the settlement of claims in this action, is Defendant aware of any such actions?

7. Counsel has failed to respond to the Court’s inquiry regarding any necessary translation(s) of the Notice.

8. Counsel has failed to provide an objection form for the Court’s review.

9. The Notice continues to refer to the incorrect Department. [CX 101 instead of CX 103].

10. As to the Proposed Order, the Settlement is still not identified by ROA number and the objection form purportedly attached as an exhibit has not been provided.

11. The Proposed order still refers to the non-existent plural form “Class Representatives.”

12. Counsel has failed to propose a workable final approval hearing date, instead proposing the historical “January 20, 2022 at 8:30 a.m.”

Plaintiff to give notice, including to the LWDA and file proof of same within five calendar days of the date of this order