Judge: Lon F. Hurwitz, Case: 19-01060073, Date: 2024-04-05 Tentative Ruling
Motion for Final Approval
FACTS/OVERVIEW: This is class action alleging a single claim, violation of Bus. And Prof. Code § 17200, based on typical labor code violations, including unpaid wages, meal and rest break premiums, unpaid minimum wages, untimely final wages, non-compliant wage statements, failure to keep accurate payroll records, and unreimbursed business expenses.
The Notice of Settlement was filed August 17, 2020. Preliminary Approval papers were filed December 24, 2020. The initial Preliminary Approval hearing was held April 9, 2021. The Court had to continue the Preliminary Approval hearing three different times based on counsel’s failure to address the issues identified by the Court and for counsel’s failure to timely file supplemental papers.
On September 27, 2022, after nearly two years of continuances, the Court granted the Motion for Preliminary Approval of the Class Action Settlement (ROA 27) on Plaintiff’s fourth attempt. The proposed settlement included the following characteristics:
· Gross settlement amount of $525,000
· Attorney Fees: $175,000 (1/3)
· Litigation Costs: $20,000 (NTE)
· Plaintiff’s Enhancement: NTE $5,000 (reduced from $15,750 per Amd. No. 1)
· Admin. Costs: $8,000 (NTE)
· Class size: 213
In the Order, the Court specifically stated that the Motion for Final Approval “shall” be filed by December 22, 2022. (Id. ¶ 13.) Counsel failed to timely file the motion pursuant to that Order. Therefore, this matter had to be continued. (ROA 219.) The Court also tentatively set an OSC re sanctions for failure to meet the filing deadline file, but withdrew it. (Id.)
The Court’s Order also included several specific instructions:
“A proposed order shall be filed with the motion and must include the following:
1. A method for the Administrator to inform the class of the final judgment, per Cal. Rules of Court, rule 3.771(b).
2. A date for final accounting and if applicable, final distribution of residual funds.
3. Identification of the ROA of the declaration to which the final Settlement Agreement is attached.
4. A statement that Plaintiff shall submit a copy of the Order and Judgment to the LWDA within ten calendar days after entry of the Order and Judgment.
The Court also ruled that the proposed order must not include dismissal of the matter.” (ROA 219.)
At the continued hearing on April 21, 2023, the Court had to continue the hearing again because of Plaintiff’s non-compliant papers. (ROA 239). The Court found that counsel had apparently filed the same declaration twice (ROA 222, 230), and that neither counsel’s declaration not the administrator’s declaration were electronically bookmarked. (ROA 239). The Court ordered counsel to file supplemental papers addressing the Court’s concerns, and warned that the failure to fully address the enumerated issues would result in denial of Final Approval, with prejudice. (Ibid.)
On July 14, 2023, Plaintiff filed a supplemental brief and supplemental declaration of counsel, as well as a proposed Order, in an attempt to address the outstanding issues. (ROA 252, 254, 248.)
ANALYSIS:
At the April 21, 2023 hearing, the Court identified the following concerns with Plaintiff’s motion for final approval:
1. Fairness
It is well-settled that preliminary approval is not final approval and the level of scrutiny at the preliminary approval stage is considered something less than a “finding” of fairness and more of a “feeling” of fairness. (See 7-Eleven Owners for Fair Franchising v. Southland Corp. (2000) 85 Cal.App.4th 1135, 1166.)
The Court was inclined, at that time, to deny Final Approval of the Settlement. Counsel’s failure to address or even acknowledge the unfairness wrought by the terms of the settlement was concerning.
The end date for the class period was the preliminary approval date, which order was entered 09-27-22. At preliminary approval, the estimated class size was 182. Because of Plaintiff counsel’s failure to meet Court-ordered filing deadlines and repeated failures to address issues identified in the Court’s orders, the class size ultimately increased to 213 when preliminary approval was finally granted, nearly two years after the first hearing on the motion.
Throughout preliminary approval, the Court expressed concerns about the escalator clause and number of workweeks. Eventually, Defendant explained the escalator clause was not triggered because it utilizes a truncated date range of 03-28-15 through 03-26-20. This end date was not surprising or necessarily concerning in light of the date the parties mediated, 05-13-20. The escalation trigger is 17,000 workweeks through 03-26-20. (Settlement [ROA 102 Ex. 1] ¶ 46.) As explained by Defendant, 18 of the then-31 additional class members were hired after the escalation end date, so their workweeks were not counted, while the remaining 13 employees’ workweeks were added, but the total workweeks nonetheless fell short of the 17,000 needed to trigger an increase to the GSA. (ROA 163 [Phillips Decl.].)
At preliminary approval, on a simple percentage basis, 18 additional employees, as compared to the 182 originally estimated, was less than a 10% increase in class size, which is not unusual. Additionally, assuming the NSA was then $317,000, the simple average payment was reduced from $1,741.75 to $1,488.26. This is not, by any means, ideal, but it can be tolerated in some circumstances.
The Administrator reported that as of 1/13/23, there were 285 Class Members who worked a total of 30,703.13 workweeks during the class period. (Gomez Decl. of 4/06/23 ¶ 6.) That means the number of workweeks has increased by approximately 81%. The class size increased another 34%; so, taken together, the increase from settlement is approximately 44% in class size. This results in the simple average payment further reduced to $1,112.28, or a reduction of approximately 57%.
While at one point such an anomalous result was avoidable, it has now come to pass the Settlement’s use of two different dates for the Class Period and the Escalator Period has produced unfairness. To be clear, the Court finds it is unfair for the settlement to simultaneously release all the additional claims post escalator period and fail to increase the value of the Settlement by any amount. This unfairness should have been obvious to Plaintiff’s counsel before notices were mailed and the Court should have been informed of this material development before Final Approval.
A substantial reduction in attorney’s fees is in order for the reasons discussed herein, but, even were the Court to award $0 in attorney’s fees, the resulting settlement would still be unfair to class members. The parties must solve this problem. There is no credible argument $525,000 is fair and that amount will not be approved for the class period as currently defined. Another solution must be proposed.
ISSUE: Counsel does not start off on the right foot, and appears to place the blame elsewhere for the delay in reaching a possible final approval of the settlement. In the supplemental brief, counsel contends that although the preliminary approval process was lengthy, “the majority of delay time was due to either the Parties requiring additional time to address points of inquiry raised by the Court in regards to the Motion for Preliminary Approval, or as the unintended consequences of multiple Case Reassignments and continuations of the hearing on the Motion for Preliminary Approval unrelated to supplemental briefing.” (Supp. Brief, 2:22-26.) Counsel then purports to set forth the procedural chronology of this case across 27 paragraphs in his 42-paragraph declaration. (St. John Decl., ¶¶ 7-33.) This comment and lengthy recitation in counsel’s declaration seems to ignore the fact that the overwhelming majority of the delay has been due to counsel’s own actions and lack of diligence.
Notably, this continues in the formatting of counsel’s most recent declaration. The footer refers to the “Declaration of Brian J. St. John” rather than the Declaration of Edwin Aiwazian as stated in the caption. (ROA 254). But the declaration is signed by Brian St. John. (Ibid.) Subsequently, counsel filed a Notice of Errata (ROA 257) explaining that “due to a clerical error,” the caption page for the declaration contained the incorrect title. Counsel then provided a “corrected caption page” as Exhibit A showing the title of the document as the “Declaration of Brian J. St. John.” (Ibid.)
Regarding the substantive issue, counsel states that Defendant and the Settlement Administrator have confirmed that as of December 24, 2020 (the date the motion for preliminary approval was filed), the Class consisted of 218 individuals who worked 20,570 Workweeks. (St. John Decl., ¶ 34.) Counsel explains that this is a 19.78% increase from the number of Class Members who were estimated to have worked during the original escalator period, and an 11.79% increase from the number who actually worked during the original escalator period. However, counsel does not explain the discrepancy with the previous report from the Administrator stating there are 285 Class Members who worked a total of 30,704.13 Workweeks. Presumably, this discrepancy is due to a change in the defined Class Period.
Counsel attests that to address the Court’s concerns, the parties met and conferred and re-engaged the mediator to seek an amendment to the Settlement. The parties were able to reach an agreement to cut off the Class Period on December 24, 2020, and to set the release period for Class Member’s release of claims to March 28, 2015 through May 13, 2021 (the date one year after the date of mediation). (See, St. John Decl., ¶¶ 35, 36.) The parties also purportedly amended the Escalator Clause to cover the entire Class Period and provide for escalation should the number of Workweeks exceed the estimated 21,000 workweeks by more than 10%. (Id.; Amendment No. 3, ¶¶ D.)
This synchronizes the Class Period and escalator period to both end on March 26, 2020. The increase in the estimated workweeks in the escalator clause to 21,000 workweeks corresponds to the new determination of 218 Class Members who worked 20,570 workweeks. Therefore, it is likely that any further increase in the number of Class Members will result in an increase in workweeks that will trigger the escalator clause and a corresponding increase in the GSA.
The estimated updated Net Settlement Amount is now $325,947.53, to account for the cost of the proposed mailing of the Corrective Notice. (St. John Decl., ¶¶ 37-38, and Exh. 4.) The supplemental brief states that if the Class is limited to only those individuals who worked during the original escalator period, the average estimated Individual Settlement Payment would be $1,671.52. The supplemental brief further states that when based on the 218 Class Members, the average estimated Individual Settlement Payment is $1,495.17, which is a 10.55% reduction. Though this reduction is still not ideal, it is more reasonable.
2. Attorney’s Fees
a. Other than himself, Mr. Aiwazian does not identify the other attorneys who billed on this case, their hourly rates, or their qualifications. Additionally, Mr. Aiwazian does not state what his customary hourly rate is and derives the $650 per hour from prior awards, which is unacceptable.
Counsel attests that the following attorneys have worked on this case, and have performed their work exclusively on a contingency basis. (St. John Decl., ¶ 39.) The attorneys and their respective hourly rates are as follows:
• Edwin Aiwazian (Managing Atty./Shareholder) $975
• Arby Aiwazian (Shareholder) $850
• Joanna Ghosh (Sr. Atty.) $750
• Elizabeth Parker-Fawley $550
• Tiffany J. Hyun $550
• Melissa LeBlanc $550
• Tara Zabehi $550
• Brian J. St. John $525
• Jeffrey D. Klein (former atty.) $550
• Stephanie S. Ponek (former atty.) $525
• Alik Ourfalian (former atty.) $475
• Shahin Y. Mehvary (former atty.) $475
However, counsel does not provide any information about the qualifications of these attorneys.
b. The Court observes counsel claims to have expended 45.6 hours to “Meet and Communicate with Plaintiff Hugo Deleon throughout the Pendency of the Case.” (Aiwazian Decl. Ex. A at 3), but this assertion lacks credibility as Plaintiff declares he “spent over 13 hours speaking and corresponding with my attorneys regarding the case and fulfilling my responsibilities as a class
representative.” (ROA 224.) While technically true 45.6 hours is “over 13”, counsel must provide a credible explanation for this disparity, e.g., whether the hours were actually incurred or anticipated and if anticipated, why they were not identified as such.
Attorney Aiwazian does not provide a supplemental declaration explaining this disparity.
In the supplemental brief, it is noted that DeLeon’s declaration (ROA 224) actually states that he initially spent 4 hours discussing this case with counsel, including what it meant to be a named plaintiff and class representative. (DeLeon Decl., ¶ 2.) DeLeon then attests he spent:
• “over 13 hours speaking and corresponding” with counsel about the case and fulfilling his responsibilities as class representative (Id. at ¶ 3);
• 9 additional hours talking to counsel about the case, identifying potential witnesses, and providing documents (Id. at ¶ 4);
• Approximately 14 additional hours reviewing NCH Management’s discovery requests (Ibid.); and
• 4 hours reviewing the settlement agreement, and 2.5 hours asking questions and discussing the potential settlement with counsel (Id. at ¶ 5).
Attorney St. John attests that following execution of the Settlement, he spent 2.10 hours communicating with Plaintiff, including updates and discussions related to the preliminary approval process, notice administration process, and final approval process. (St. John Decl., ¶ 40.) All of this adds up to more than 45.60 hours of participation by DeLeon, including communication with counsel.
c. Are there any fee-sharing, referral fee, or like agreements related to this action? If so, explain.
RESOLVED. Counsel attests there is no fee-splitting agreement with any other attorney or law firm. (St. John Decl., ¶ 41.)
3. Plaintiff must provide or identify, by ROA number, proof of service on the LWDA as to the Settlement, all amendments, the preliminary approval order, and the final approval papers.
RESOLVED. In the supplemental brief, Plaintiff states that the Settlement does not contain a release for any PAGA claims or allocation of any PAGA penalties to the LWDA. In addition, Plaintiff states that no notice of the action was provided to the LWDA.
4. Proposed Order
a. The proposed order provides the Administrator shall post the final judgment on its website for 60 days after entry. This should be a minimum of 180 days.
RESOLVED. Paragraph 18 of the proposed Order (ROA 248) states that a copy of the Final Approval Order will be posted on the Administrator’s website for at least 180 days.
b. No date for a Final Accounting has been proposed. This violates the Court’s express order that counsel do so. (ROA 219.)
RESOLVED. Paragraph 19 of the proposed Order (ROA 248) states the Final Accounting is set for April 5, 2024.
c. Counsel has failed to identify the operative settlement and agreement and amendments by ROA number in the Proposed Order. This violates the Court’s express order that counsel do so. (ROA 219.)
RESOLVED. The opening paragraph of the proposed Order identifies the settlement, agreement, and amendments by their respective ROA numbers.
d. The Proposed Order fails to include a statement that Plaintiff shall submit a copy of the Order and Judgment to the LWDA within ten calendar days after entry of the Order and Judgment. This violates the Court’s express order that counsel do so. (ROA 219.)
RESOLVED. As noted above, Plaintiff states that the Settlement does not contain a release for any PAGA claims or an allocation for any PAGA penalties, and that no notice of the action was provided to the LWDA.
e. The Proposed Order must identify, by name, each individual who has opted out.
RESOLVED. Paragraph 8 of the proposed Order (ROA 248) identifies by name the three Class Members who have opted out.
RULING:
The Motion for Final Approval is GRANTED. The Court approves the following distributions:
1. Plaintiff’s Enhancement payment of $5,000 to Plaintiff Hugo DeLeon. In making this award, the Court has considered the factors set forth in Golba v. Dick’s Sporting Goods, Inc. (2015) 238 Cal.App.4th 1251, and Clark v. Am. Residential Servs., LLC (2009) 175 Cal.App.4th 785.
2. Administration costs in the amount of $ 6,490.00 to Simpluris, Inc.
3. Attorneys’ fees will be reduced from $175,000.00 to $131,250 (25%). The Court finds the amount to be reasonable in light of the quality of the work performed by Class Counsel. In approving this amount, the Court is not approving the hourly billing rates proposed by Class Counsel.
4. Litigation costs in the sum of $12,562.47.
Final Accounting is set for April 5, 2024, at 1:30 p.m. in Department CX103. Counsel shall submit a final administrator’s report at least 14 calendar days prior to that hearing regarding the status of the settlement administration. The final report must include all information necessary for the Court to determine the total amount actually paid to class members and any amounts tendered to the cy pres recipient, Legal Aid at Work, a 26 U.S. Code section 501(c)(3) non-profit organization. It should go without saying, but if the remaining funds are not fully disbursed by the report deadline, counsel must request a continuance.
Plaintiff shall submit a revised Proposed Judgment and Order that conforms in all respects to this Order, including the corrections identified above and the correct department number. Plaintiff must also submit a redline showing all changes thereto.
The Court does not require any physical or remote appearance at the hearing scheduled for 07-28-2023.
Please inform the clerk by emailing her before 12:00 p.m. on the day of the hearing at CX103@occourts.org if both parties intend to submit on the tentative.