Judge Lon F. Hurwitz, Case 20-01122459 2024-04-05 Tentative Ruling

Judge: Lon F. Hurwitz, Case: 20-01122459, Date: 2024-04-05 Tentative Ruling

1. Motion for Approval of Class Settlement

2. Order to Show Cause re: Sanctions

Motion for Preliminary Approval

Moving Party: Plaintiff Anali Almazan, individually and on behalf of all others similarly situated

Responding Party: None (unopposed)

SERVICE: Original notice, November 16, 2022, by email. Supplemental papers, July 14, 2023, by email

RELIEF SOUGHT: Plaintiff seeks preliminary approval of a settlement in a putative wage-and-hour class and PAGA action.

FACTS/OVERVIEW:

The operative First Amended Complaint (“FAC”) was filed March 24, 2021, and contains eight causes of action, including individual and class wage-and-hour claims and a PAGA claim. (ROA 55). No party has filed a motion for arbitration. There is no discovery order or stipulation for discovery.

ANALYSIS:

The Court has been forced to continue this hearing twice due to non-compliant papers riddled with procedural errors. The first continuance occurred on February 24, 2023 (ROA 146), and the second occurred on April 28, 2023 (ROA 157).

1. The Court continued this hearing on 02-24-23 due to non-complaint papers, that needed to be corrected. (ROA 146.)

The Hearing was continued to 4/28/23.

2. On 4/28/23, the Court had to again continue the Hearing due to the failure of Counsel to comply with the corrections set forth on 2/24/23 (ROA 157). The Hearing was continued to 7/28/23 and an OSC re Sanctions was set for any failure to comply with the Court’s Orders of 4/28/23 as set forth in ROA 157.

On July 18, 2023, Plaintiff filed a supplemental brief (ROA 165) and a supplemental declaration of counsel (ROA 166) in an attempt to address these concerns.

1. In the Amended Bacon Declaration (ROA 150), numerous bookmarks are duplicative and inactive, and many are linked to a random page in an incorrect exhibit. Furthermore, the Settlement itself (ROA 150 Ex. 1) is not text-searchable and the same is true for ALL other exhibits except the Proposed Order (Ex. 5).

RESOLVED. Counsel explains that due to clerical error, an incorrect version of his amended declaration was filed with bookmarking errors. [Supp. Decl., ¶ 5.] Counsel’s supplemental declaration now correctly identifies and bookmarks the following 10 exhibits, labeled as Exhibits 1-10: (1) copy of Settlement Agreement with red-lined revisions; (2) copy of fully executed Settlement Agreement with revisions implemented; (3) proposed Class Notice with red-lined revisions; (4) proposed Class Notice with revisions implemented; (5) proposed Opt-Out Form with red-lined revisions; (6) proposed Opt-Out Form with revisions implemented; (7) proposed Information Sheet with update to year to reflect 2023; (8) proposed Preliminary Approval Order with red-lined revisions; (9) proposed Preliminary Approval Order with revisions implemented; and (10) copy of confirmation page received after submitting notice to LWDA, and printout of case on the LWDA website showing the documents were submitted on November 17, 2022, and July 18, 2023. [Supp. Decl., ¶¶ 6-12.] In addition, the declaration includes Exhibit 9-A, which is the Class Notice as attached to the Preliminary Approval Order. [Id. at ¶ 10.]

2. Counsel incorrectly identifies Dept. C20 on the caption page of the declaration.

RESOLVED.

As to the Settlement:

3. No settlement which includes a PAGA claim will be approved absent submission of all pre-filing notice(s) provided to the LWDA. The scope of the PAGA release is tied to the noticed violations and claims. Counsel has failed to provide this critical evidence.

ISSUE: Although counsel has provided a copy of the confirmation email from the LWDA and printout from the LWDA website of the PAGA case detail [see, Supp. Decl., ¶ 12 and Exh. 10], counsel has not provided copies of the actual pre-filing notices submitted to the LWDA.

4. The Gross Settlement Amount ($250,000) is approximately 17% of the estimated maximum exposure ($1,400,000). The valuation is insufficient. (See Decl. ¶¶ 50–73.) The Court cannot fulfill its duties unless it knows the maximum and realistic values and discounts of all claims in the FAC that are to be released as part of this settlement. This includes a discussion of the specific evidence supporting same.

RESOLVED. Counsel attests primary claims were for meal break violations. Counsel reviewed time and payroll records for Class Members and formulated damages theory. Records review showed 90% violation rate pre-lawsuit, and a 10% violation rate after the lawsuit was initiated. Counsel calculated number of workweeks for the class (Qualifying Work Weeks totals 10,906 during Class Period), and average rates of pay ($12.50 per hour), and number of Class Members. Determined maximum liability for meal period damages was $408,354.26. [Supp. Decl., ¶ 18.]

Counsel performed same analysis for rest period violations, and assumed 90% violation rate pre-lawsuit and 10% violation rate post-filing. Calculated maximum liability for rest break violations at $408,354.26. [Id. at ¶¶ 19-21.]

Counsel calculated § 226 and § 203 penalties using same data, and assumed 100% violation rate. Calculated maximum liability for § 226 penalties at $190,886, and maximum liability for § 203 at $390,000. [Id. at ¶¶ 23-25.]

Regarding claim for off-the-clock wages due and owing, counsel attest the claim was “super specific” to Plaintiff because he was a manager who worked after hours, and the claim is not something other Class Members would have experienced. As a result, claim was not subject to class-wide proof and could not be quantified. Therefore, counsel placed a value of $0 on the release of this claim. [Id. at ¶ 22.]

Regarding low valuation, counsel attests that Defendant provided “profits and loss” statements for the preceding years, which indicated a substantial decline in gross sales, net profit, and net income after the COVID-19 pandemic. The figures in these documents suggested Defendant would have been hampered in its ability to pay a class-wide judgment because it would have crippled its cash flow and operations during time when business was already suffering due to prevailing economic conditions. [Supp. Decl., ¶ 32.]

Defendant also disclosed it had reduced employee headcount, cut expenses, deferred payment of debts, and taken other measures to mitigate impact of financial position partly due to pandemic. Also provided context to cash-on-hand figures in their financial records, investment in equipment, coverage of expenses due to lack of traditional line of credit, etc. Counsel attests that if larger settlement had been negotiated, Defendant would have had to take on more debt during critical time, and this could have been fatal to the business. Since dozens of Class Members are still employed by Defendant, counsel did not think it was advisable to push for a higher settlement. [Supp. Decl., ¶¶ 33, 34.]

5. No value is assigned to PAGA claims based on “double recovery,” but many Labor Code violations other than §§ 226 and 203 are provided as PAGA predicates in the FAC (ROA 55) and are sought to be included in the release. (See Decl. ¶ 63.) As stated above, a full valuation, including maximum and realistic penalties and discounting, is required for release.

RESOLVED. Revised Settlement states that 72 Aggrieved Employees worked a total of 2,848 PAGA Periods during the Class Period. This does not trigger the Escalator Provision. [Red-lined Settlement, Sec. III.E.17.]

PAGA penalties were based on same time period as § 226 penalties, and it was assumed there as a PAGA violation for every employee during every pay period. PAGA penalties calculated at maximum amount of $286,329, which is comprised of $95,443 in § 558 penalties and $190,886 in § 2699(f) penalties. Counsel attests these would have been subject to reduction by the Court at trial, and case law show reductions between 30% and 90%. Counsel’s “best guess” is that Court would reduce penalties by 75% in this case to $70,000.

Maximum recoverable damages calculated as approximately $1.4 million, with additional $286,329 in PAGA penalties. [Supp. Decl., ¶ 26.]

6. Counsel states he examined Defendant’s company records related to its financial position and the impact of Covid. (Decl. ¶ 69.) What records were those and what specifically was revealed? Additionally, how was that quantified for purposes of the settlement?

RESOLVED. Counsel attests that Defendant provided “profits and loss” statements for the preceding years, which indicated a substantial decline in gross sales, net profit, and net income after the COVID-19 pandemic. The figures in these documents suggested Defendant would have been hampered in its ability to pay a class-wide judgment because it would have crippled its cash flow and operations during time when business was already suffering due to prevailing economic conditions. [Supp. Decl., ¶ 32.]

7. The simple average individual recovery is insufficient. Determine the high and low amounts as well as Plaintiff’s individual share.

RESOLVED. Counsel attests that, assuming 100% participation and with an average pre-tax estimated payment, Class Members will receive an average payment of $764.30. This was calculated by taking current estimate of the NSA ($129,166.67) and dividing it equally between 169 Class Members. [Supp. Decl., ¶ 37.] Defendant represented that total number of Qualifying Work Weeks worked by Class Members during Class Period is 10,906, which means Class Members projected to receive net of approximately $11.84 per Qualifying Work Week. Class Members who worked for entire Class Period of 350 Work Weeks are projected to receive maximum payment of $4,145.27. Minimum projected estimate (1 work week) is $11.84. [Id. at ¶ 38.] Plaintiff’s individual share based on 161 work weeks, with projected payment of $1,906.83. [Ibid.]

8. The number of class members (159) is as of 12-21-20. (Stip. at 17.) Since the class period runs through 09-21-22, updated data as to the class size needs to be provided, including whether the escalation clause has been triggered.

RESOLVED. Parties accounted for “potential” increase in size of Class by 13% (21 employees). As of May 24, 2023, Defendant represented there were 169 Class Members. [Red-line Settlement, Sec. III.E.17; Supp. Decl., ¶ 39.]

9. The escalation clause provides for a “proportionate increase.” (Stip. § III(E)(17).) This is vague and needs to be revised with precision. It also appears to conflict with Stip. § III(E)(17), which states no increase to the GSA will be made “under any circumstances whatsoever.” Which provision controls and why?

RESOLVED. For every additional Class Member above 180 employees, Defendant agrees to increase the GSA by the following formula: 1/180 (the proportion of the increase) x $250,000 (GSA), for total of $1,388.89 per additional Class Member above 180. [Red-lined Settlement, Sec. III.E.17.] Updated class size does not trigger escalation clause, which is triggered only if class size increases to more than 180. [Supp. Decl., ¶ 39.]

10. Checks should remain negotiable for 180, not 90, days. (Stip. at 14.)

RESOLVED. See Revised Settlement at Sec. III.E.10.

11. The deadline for Objections, Disputes, and Requests for Exclusion should be 60 days. What deadline applies in case of remailings?

RESOLVED. Revised Settlement states that deadline for Requests for Exclusion, Objections, and Disputes is 60 days. [Red-lined Settlement, Secs. III.C., III.E.]

ISSUE: Revised Settlement states that for remailing, deadline extended by an additional 15 days. Deadline extension should be at least 45 days.

12. Any amendments also require Court approval. (Stip. at 23.) This provision needs to be revised.

RESOLVED. See revision of Sec. VI.A. of Settlement.

13. A combined PAGA and Class Release will not be approved. Separate releases are required.

RESOLVED. Revised Settlement includes new paragraph entitled “PAGA Release,” which provides: “The Labor Workforce Development Agency, State of California, in addition to all Aggrieved Employees, and Plaintiff Almazan as a proxy for the LWDA, are deemed to release, on behalf of themselves and their respective former and present representatives, agents, attorneys, heirs, administrator, successor, and assigns, the Released Parties from all claims for civil penalties under the Labor Code pursuant to PAGA during the PAGA Period, that were alleged, or reasonably could have been alleged, based on the facts stated in the Complaint, and the PAGA Notice submitted by Plaintiff to the LWDA on or about January 8, 2020, in LWDA Case No. LWDA-CM-765471-20. The PAGA release shall be given full res judicata and collateral estoppel effect upon entry of the judgment in this Action so as to bar the LWDA and any other individual or entity from filing or pursuing the Released PAGA Claims against the Released Parties in any forum.” [Sec. V.B.]

14. The Release is both vague and overbroad, e.g., “based on the subject matter alleged in the Action.” As to class claims, the release should be limited to claims asserted in the operative complaint, or that could have been asserted in the operative complaint based on the facts alleged therein. As to PAGA claims, the release should be limited to claims asserted in the letter submitted to the LWDA; or claims that could be asserted against the Released Parties based on the factual allegations therein or in the operative complaint.

RESOLVED. Revised Settlement states: “… based on the facts or laws alleged in the Complaint.” As to class claims, Revised Settlement now includes phrase “Specifically, this includes any claims” as related to the claims asserted in the operative complaint. Regarding the 10th enumerated claim for PAGA penalties, the Revised Statement adds the phrase “predicated on any of the Labor Code sections identified below in § 5(B) of the Agreement.” It deletes the sentence stating that the “Settlement is conditioned upon the release by all Participating Class Members of any claim under Labor Code § 2698, et seq. and upon covenants by all members that they will not participate in any proceeding seeking penalties under Labor Code § 2698, et seq.” [Red-lined Settlement, Sec. I.Z.]

15. The releases may not include a covenant not to sue. Res judicata is sufficient.

RESOLVED. Revised Settlement Sec. V.C. (formerly Sec. V.B.) revised to remove covenant not to sue.

16. The general release by named Plaintiff is extraordinarily broad. (Stip. at 20–23.) Was any separate compensation provided for this release?

RESOLVED. Revised Settlement states that “the consideration set forth” in the Settlement, “including the Service Award of Ten Thousand Dollars ($10,000)” represents full settlement, and that “No other consideration has been provided to Plaintiff.” [Red-lined Settlement, Sec. V.C.] Revised Settlement also deletes portion of Individual Release re agreement “not [to] institute any action or cause of action … suits, debts, liens, etc.” [Ibid.]

17. How will employer-side payroll taxes be handled?

RESOLVED. Revised Settlement states that employer-side payroll taxes shall be paid by Defendant. [Red-lined Settlement, Sec. III.E.1.]

18. Provide Proof of Service of the Settlement and moving papers on the LWDA.

RESOLVED. See Exhibit 10 to Counsel’s supplemental declaration.

As to the Notice:

19. The problems identified above as to the release apply with equal force and must be revised.

ISSUE: Need to revise remailing deadlines.

20. Identifies a cy pres recipient of unclaimed funds, which is inconsistent with the settlement, which provides for the State Controller’s unclaimed property fund.

RESOLVED. Revised Class Notice identifies State Controller’s Unclaimed Property Fund as the cy pres recipient.

21. References a potential reduction in individual shares based on a “Wage Release Agreement.” A full explanation is required.

RESOLVED. Revised Class Notice deletes this provision.

22. The section regarding exclusion should direct the individual to the included opt-out form.

RESOLVED.

23. The objection process is too onerous. Objections can and should be made to the Settlement Administrator and thereafter must be disclosed in full to the Court.

RESOLVED. Revised Class Notice states objections should be sent to Settlement Administrator only. See Sec. V.C. of Revised Class Notice.

Relatedly, the “proof of service” reference in the Settlement provision for Objections should be revised.

24. How will class members be notified of final judgment? Counsel should provide a method for class members to obtain a copy of the final judgment and include that in the Notice. It is sufficient if it is available on the administrator’s website.

RESOLVED. Revised Class Notice provides that final judgment will be available on Administrator’s website. See Sec. VII of Revised Class Notice.

25. The Notice must include instructions for accessing case documents, including the court’s website.

RESOLVED. Revised Class Notice includes instructions for accessing documents on court website and Administrator’s website. See Sec. VII of Revised Class Notice.

26. The Notice and exclusion form must state that opting out of the Settlement still results in a PAGA payment because there is no option to opt-out of that portion.

RESOLVED. Revised Class Notice includes language in this regard. See, Sec. V.B.

27. The Notice incorrectly identifies Dept. CX101.

RESOLVED.

28. Does the Notice need to be provided in any languages other than English?

RESOLVED. Settlement provides that Class Notice will be mailed in Spanish “where appropriate.” [Red-lined Settlement, Sec. I.H.]

As to the Proposed Order:

29. The Notice should be attached as exhibit 1 and the order should identify the operative settlement (and any amendments) by ROA number(s).

RESOLVED. See Exhibits 9, 9A, and 10 to counsel’s supplemental declaration.

30. Disbursements are not “conditionally” or “preliminarily” approved and must be deleted.

RESOLVED. See Exhibit 8, ¶¶ 7, 9, 12, and 13.

31. Incorrectly identifies Dept. C20

RESOLVED. See Exhibit 8, ¶ 10.

32. References Paragraph “22g” - does not exist

RESOLVED. See Exh. 8, ¶ 15 (referenced Para 21).

Other Issues:

33. Is there an operative fee-split or referral agreement in this action? If so, please explain.

RESOLVED. Counsel attests that he will provide 10% “co-counsel fee” to NM Law, APC, which was hired to assist Plaintiff and counsel with probate paperwork after passing of original representative, Anali Almazan. [Supp. Decl., ¶ 65.]

34. The parties must indicate by declaration(s) whether there are any pending cases that could be affected by the settlement of claims in this matter. For example, counsel must investigate and provide a declaration(s) explaining the investigation and whether there are any other pending class or representative claims, including PAGA, whether in a court or in the pre-filing LWDA waiting period, that could be affected by this settlement.

RESOLVED. Counsel attests that Plaintiff is unaware of any pending cases which could be affected by Settlement, and no notice of related claims has been served on counsel’s office. Counsel also attests he search the LWDA website and did not find any pending notices against Defendant regarding claims that could be affected by Settlement. In addition, counsel asked Defendant’s counsel if there were any pending cases, and Defendant’s counsel confirmed there are no pending cases. [Supp. Decl., ¶ 66].

RULING:

Plaintiff and Plaintiff’s counsel have successfully resolved most of the 34 issues identified by the Court in its April 28, 2023 Ruling.

However, the Settlement and Class Notice must be revised to reflect a deadline of 45 days to submit Requests for Exclusion, objections, and disputes after Class Notice is re-mailed to Class Members. In addition, counsel still has not provided copies of the actual letters and notices sent to the LWDA before the filing of this lawsuit. These documents must be provided to the Court before preliminary approval of the Settlement.

Therefore, the hearing on the Motion for Preliminary Approval is CONTINUED to October 6, 2023 at 1:30 p.m. in Department CX103 so that Plaintiff may address the issues identified above.

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.

The OSC re Sanctions is continued to October 6, 2023 at 1:30 p.m.

Clerk to give Notice.