Judge Lon F. Hurwitz, Case 19-01084122 2023-09-01 Tentative Ruling

Judge: Lon F. Hurwitz, Case: 19-01084122, Date: 2023-09-01 Tentative Ruling

1. Motion for Approval of PAGA Settlement

2. Status Conference

Motion for Approval of PAGA Settlement

RELIEF SOUGHT: Plaintiff Breonna Johnson seeks approval of her PAGA-only settlement

FACTS/OVERVIEW: This case contains individual and representative PAGA claims. On July 17, 2019, Plaintiff Breonna Johnson (“Plaintiff”) filed a Complaint against Defendant Olive Crest (“Defendant”). (ROA 2). The Complaint alleges the following six causes of action:

1. Violation of PAGA for Failure to Provide Meal Periods;

2. Violation of PAGA for Failure to Provide Rest Periods;

3. Violation of PAGA for Failure to Pay Minimum Wages;

4. Violation of PAGA for Failure to Pay Overtime Wages;

5. Violation of PAGA for Failure to Provide Accurate Itemized Wage Statements; and

6. Violation of PAGA for Failure to Timely Pay Wages at Separation

Plaintiff alleges she was employed as a non-exempt worker for Defendant, a non-profit organization dedicated to helping abused and neglected children. [Compl., ¶¶ 7-9.] Plaintiff worked as a Resident Youth Partner and Case Manager, and her duties included cleaning apartment units, verifying medication, maintaining the health and safety of the residents, and performing administrative duties. [Id., ¶ 9.] Defendant allegedly maintained policies that violated various Labor Code provisions. Notice was provided to the Labor Workforce Development Agency (“LWDA”) on May 6, 2019. [Declaration of Jonathan Ricasa (“Ricasa Decl.”) (ROA 147), ¶ 9.]

On April 16, 2020, Plaintiff sent Olive Crest a letter threatening to assert individual claims regarding the termination of her employment. In the Individual Action, Plaintiff asserted claims for retaliation, discrimination, disability discrimination, failure to accommodate, wrongful termination in violation of public policy, and whistleblower retaliation.1 [Ricasa Decl., ¶ 12.] After mediation, the parties reached an agreement in principle to settle both the PAGA Action and the Individual Action. On January 5, 2022, the parties entered into a confidential settlement agreement in the Individual Action, and that matter has been resolved. [Id., ¶¶ 19, 20.]

On June 22, 2023, Plaintiff filed the current Motion for Approval of PAGA Settlement. (ROA 154). This is the first hearing on the matter.

SUMMARY OF SETTLEMENT AND SETTLEMENT ISSUES: (ROA 147)

The fully executed Amended PAGA Settlement Agreement is attached as Exhibit 2 to the Declaration of Jonathan Ricasa (ROA 147).

1. “PAGA Settlement Members” Definition: “All non-exempt employees employed by Defendant in either the residential homes, as a night monitor, or in the Transitional Age Youth (‘TAY’) case manager positions at any point during the PAGA Period.” [Settlement, § I.O.] The term “Aggrieved Employees” must be defined in Settlement.

2. PAGA Period: “[T]he period of time from May 6, 2018 to October 14, 2021.” [Id., § I.N.]

3. Settlement: Mediation was conducted on October 14, 2021 with Michael J. Loeb, Esq. of JAMS. The case did not settle at mediation. Subsequently, the mediator facilitated further discussion and an eventual settlement. On March 15, 2022, the parties entered into the PAGA Settlement. However, on August 11, 2022, the PAGA Settlement was rescinded pursuant to an escalator clause which had provided Defendant with the right to void the settlement if the covered pay periods exceeded a certain number. The parties engaged in further discovery, and from the information and data produced by Defendant, Plaintiff’s counsel compiled the evidence to determine a fair settlement range. In March 2023, after the parties renegotiated the settlement, they signed the Amended PAGA Settlement Agreement. [Ricasa Decl., ¶¶ 19-24.]

4. Number of Aggrieved Employees: 292

5. Gross Settlement Amount (GSA): $200,000.00 provided, however, that the number of Covered Pay Periods does not exceed 7,394. [Settlement, § III.B.]

6. Net Settlement Amount (NSA): Defined as “the amount from the [GSA] that is available for distribution for the LWDA Payment and for Settlement Shares to the PAGA Settlement Members” after deducting attorneys’ fees, administration costs, and “Plaintiff’s Release Payment.” [Settlement, § I.J.] Actual amount not provided in Settlement Agreement.

7. PAGA Released Claims: “Any and all known and unknown claims under the PAGA against the Released Parties that were or could have been pled based on the factual allegations of the PAGA Notice and Complaint, including but not limited to allegations that Defendant: (1) failed to provide compliant meal periods; (2) failed to provide compliant rest periods; (3) failed to pay minimum wages; (4) failed to pay overtime wages; (5) failed to provide accurate itemized wage statements; and (6) failed to timely pay wages due upon termination. This includes, but is not limited to, claims for violation of California Labor Code sections 201-203, 226, 226.7, 510, 512, 558, 1182.12, 1194, 1197, 1197.1, 1198, 1199, 2698 et seq., and 2699.5 et seq. Excluded from the release are potential individual claims for alleged Labor Code violations, if any, which do not arise under PAGA.” [Settlement, § I.Q.]

8. Valuation of Claims: Based on 292 employees who worked a total of 7,376 pay periods, calculated at the “initial” violation rate of $100 per violation for period of May 6, 2018 to May 5, 2019, and thereafter at the “subsequent” violation rate of $200 per violation:

• Maximum exposure with stacking – If PAGA penalties assessed with stacking for every covered pay period and each cause of action, potential maximum penalties would total approx. $9,573,900. Claimed violations valued as follows: (1) Meal break violations, $629,800; (2) Meal break premiums, $1,259,600; (3) Rest break violations, $629,800; (4) Rest break premiums, $1,259,600; (5) Wage Statement violations, $5,759,000; and (6) Waiting time violations, $36,100.

• Maximum exposure without stacking – If PAGA penalties assessed without stacking and all at “initial” violation rate of $100, potential penalties totals $737,600 (7,376 x $100/pay period) [Ricasa Decl., ¶¶ 26-29.]

ISSUE: GSA is 27.1% of possible maximum penalties without stacking. [Id., ¶ 30.] However, GSA is only 2% of possible maximum penalties with stacking (This information is not provided in counsel’s declaration.)

Reasons given for discount: Counsel states central issue is alleged failure to provide compliant meal periods. Defendant might argue that type of meal period provided was a compliant on-duty meal period, and the charitable role is serves in the community merits a reduction in any judgment. Counsel also cites manageability issues, questions of which PAGA penalties apply, and questions as to whether stacking of PAGA penalties is allowed.

ISSUE: GSA is low compared to maximum exposure. Inadequate reasons given for substantial discount. Even though Wage Statement violations is the majority of the valuation (with stacking), counsel fails to discuss violations other than meal break violations. Counsel also does not provide breakdown by cause of action of penalties without stacking. Settlement provides that if it not approved by the Court, then it will become null and void. [Settlement, § III.K.e.]

9. PAGA Payment: Total amount not provided in Settlement Agreement.

10. Escalator Clause: Although GSA is contingent on covered pay periods not exceeding 7,394, no escalator clause is provided.

11. Payments to Aggrieved Employees:

Pro rata based on number of covered pay periods. [Settlement, § III.G.] Minimum payment, $3.21. Maximum payment, $266.41. Average payment, $81.08. [Ricasa Decl., ¶ 31.] Payments not reduced by payroll taxes or deductions. Administrator to issue IRS Form 1099s to PAGA Members. [Settlement, § III.F.]

Checks negotiable for 180 days. Settlement Administrator will try to remail returned checks to correct address of PAGA Member. If PAGA Member cannot be located or fails to cash check, unclaimed funds will be distributed to cy pres recipient, Orange County Rescue Mission, a 501(c)(3) non-profit that provides support and assistance to the homeless. [Settlement, § III.Q.]

12. Distributions:

$ 80,000.00 Attorneys’ fees

$ 16,000.00 Litigation costs (NTE)

$ 6,500.00 Enhancement

$ 3,000.00 Administration costs

$ 70,875.00 LWDA (net penalty)

$ 23,625.00 Employees (net penalty)

ISSUE: Attorneys’ fees are 40% of GSA. 50-50 fee-splitting arrangement between counsel and co-counsel. [Ricasa Decl., ¶ 35, Exh. 4.] Amount of attorneys’ fees is higher than usual 33.33% granted by the Court. Counsel attests his current lodestar is $77,400 (154.8 hours at $500/hour), and co-counsels’ combined lodestar is $30,792.50 (55.8 hours at $500/hour and 8.9 hours at $325/hour). Counsel also attests he is a sole practitioner who was precluded from taking work on other cases. [Id., ¶p 36, 37.] Since mediation included settlement of Plaintiff’s individual FEHA-related claims, Counsel must clarify if lodestar includes work related to those claims. If so, those hours must be deducted.

Enhancement of $6,500 is higher than $5,000 usually granted by the Court. Although Plaintiff has submitted a declaration detailing her efforts in this litigation, it is not clear how much of this effort went towards litigating and settling her individual FEHA-related claims rather than the PAGA claims. Plaintiff worked only 4 or 5 months in PAGA Period.

13. Disputes, Opt Outs, Objections: PAGA Members cannot opt out or otherwise be excluded from the settlement. [Settlement, § III.L.]

ISSUE: Settlement does not include provisions for disputes or objections.

14. Continuing Jurisdiction: Settlement states that it “may be amended, modified, changed, or waived only by an express written instrument signed by all Parties or their successors-in interest.” [Settlement, § III.U.4.]

ISSUE: Settlement must state that Court approval is required for any modifications. It must also state that the Court has continuing jurisdiction pursuant to CCP § 664.6.

ISSUES RE PAGA AWARD NOTICE:

Notice attached as Exhibit A to Settlement Agreement. The following issues need to be resolved:

1. The Notice is to be revised consistent with the issues addressed above.

2. Notice does not explain that PAGA Member cannot opt out of the settlement.

3. Notice does not explain what a PAGA claim is and why the LWDA receives 75% of the NSA.

4. Notice should be consistent with Settlement and refer to “Covered Pay Periods” instead of “workweeks.”

ISSUES RE PROPOSED ORDER: (ROA 163)

1. The Proposed Order is to be revised consistent with the issues addressed above.

2. The Proposed Order should include information about the check cashing period.

3. The Proposed Order should include information about distribution of uncashed funds to the cy pres recipient.

4. The Proposed Order should state the action will be “dismissed with prejudice” at the final accounting hearing. This assumes full compliance with all Court orders and that all distributions are complete by that date.

5. Paragraph 15 should state that Court’s continuing jurisdiction is pursuant to CCP section 664.6.

RULING:

The Motion for Approval of PAGA Settlement is CONTINUED to November 3, 2023, at 1:30 p.m. in Department CX103 to give counsel the opportunity to address the issues identified below by the Court.

Counsel is ORDERED to file supplemental papers addressing the Court’s concerns no later than fourteen (14) calendar days prior to the continued hearing date. Counsel is ORDERED to provide red-lined versions of all revised papers. Counsel is ORDERED to provide the Court with an explanation of how the pending issues were resolved, with precise citation to any corrections or revisions. A supplemental declaration or brief that simply asserts the issues have been resolved, or does not clearly state a specific concern has been resolved, is insufficient and will result in a continuance and/or an OSC re Sanctions for failure to comply with the Court’s Orders per CCP Section 177.5.

Status Conference CONTINUED to November 3, 2023 at 1:30PM.

ISSUES RE SETTLEMENT AGREEMENT:

1. The term “Aggrieved Employees” must be defined in the Settlement.

2. Actual amount of the Net Settlement Amount must be provided in the Settlement.

3. Total Settlement Amount is low compared to maximum exposure. Inadequate reasons given for substantial discount. Even though Wage Statement violations is the majority of the valuation (with stacking), counsel fails to discuss violations other than meal break violations. Counsel also does not provide breakdown by cause of action of penalties without stacking.

4. Although Total Settlement Amount is contingent on covered pay periods not exceeding 7,394, no escalator clause is provided. Why not?

5. Attorneys’ fees are 40% of Total Settlement Amount, which is substantially higher than 33.33% usually granted by the Court. Since mediation included settlement of Plaintiff’s individual FEHA-related claims, counsel must clarify if lodestar includes work related to those claims. If so, those hours must be deducted.

6. “Release Payment” to Plaintiff of $6,500 is higher than $5,000 usually granted by the Court. Counsel and Plaintiff need to submit declarations clarifying how much of Plaintiff’s effort went towards litigating and settling her individual FEHA-related claims rather than the PAGA claims.

7. Settlement must include provision for PAGA Members to object to Settlement or dispute their number of Covered Pay Periods.

8. Settlement must state that the Court approval is required for modification of the Settlement. Settlement must also state that the Court has continuing jurisdiction pursuant to CCP § 664.6.

ISSUE RE PAGA NOTICE: