Judge Lon F. Hurwitz, Case 21-01178012 2023-06-16 Tentative Ruling

Judge: Lon F. Hurwitz, Case: 21-01178012, Date: 2023-06-16 Tentative Ruling

1. Motion for Approval of Class Settlement

2. Status Conference

Motion for Preliminary Approval

REQUEST: Plaintiffs seek preliminary approval of a settlement in a putative wage and hour class and PAGA action.

OVERVIEW: Defendant Anyone Home Inc. employed Plaintiff as a non-exempt, hourly Property Consultant. Defendant Todd Katler is the CEO, secretary, sole director and shareholder, and agent for service of process for Anyone Home Inc. The operative SAC (ROA 46) contains individual and class/wage hour claims and PAGA claims. No party has filed a motion to compel arbitration. There is no discovery order or stipulation for discovery.

This is the FOURTH hearing on this motion based on Plaintiff’s failure to address issues identified by the Court. It was first heard on 03-04-22. (ROA 85.) It was heard again 05-13-22 (ROA 106) and again on 11-04-22 (ROA 124).

ANALYSIS: The issues remaining per the Court’s most recent order (ROA 124):

1. The Court ordered a “detailed valuation” as well as applicable reductions and discounts. Counsel provided no calculations, but only provided maximum settlement figures for some but not all of Plaintiff’s claims. Details must be provided as to the maximum value of each claim and specific reasons why each claim should be discounted to arrive at a reasonable recovery estimate. This explanation should describe any particular defenses raised by defendants and/or the results of investigation and discovery that caused plaintiffs to conclude that the value of the particular claim should be discounted. Further, the Court will not assume what counsel means by the “myriad existential legal and factual risks inherent in class litigation” with regards to a discount from $871.00 to $915.94 per workweek to $25.61 per workweek, which appears to be a 97%-98% discount, leaving a recovery of 2-3% for the class members. Without further specificity in analysis, the Court cannot approve this settlement as fair and reasonable.

RESOLVED. Plaintiff has provided his expert’s analysis to support the maximum valuation of all claims at $17,821,457.34. (ROA 139.) The PAGA claim is included in that overall valuation, separately valued at $13,300,546. (Id. ¶ 57.) It thus appears the maximum value of the class claims was $4,520,911.34. (ROA 139 Ex. B. at 5.) The expert does not purport to discount any of the claims.

NOTE: Mr. Karim states he will seek costs for the expert’s work in this round of papers. However, if, as Mr. Karim states, all of this detailed work was done and analyzed before mediation, there was no reason to now re-engage the expert or provide the lengthy expert declaration. In other words, this is, at best, duplicative and any expert costs after mediation should not be reimbursed.

Mr. Karim does not provide discounts on a per claim basis, but instead, again argues the estimated recovery is significant enough ($1,834.86 per class member) to warrant approval and the overall settlement of $800,000, representing 4.5% of the maximum exposure, is within the range of reasonableness. (ROA 137 ¶ 9.) This would depend, of course, on the merits of the applied discounts, but he again glosses over that topic.

The CEO of Defendant, Todd Katler, explains that upon receiving the PAGA notice in November 2020 and continuing after the lawsuit was filed in January 2021, Defendant began to revise and reform its policies and practices to conform with the law. (ROA 135.) When looking at the recovery in terms of the class portion, it is better than the overall 4.5% argued.

However, looking at the maximum PAGA claim value of $13,300,546 provided by the expert, the allocation of $10,000 seems insufficient. Counsel previously explained the low allocation to PAGA was intended to maximize recovery for the class members and it accomplishes that as the relative percentage of GSA to class claims is 17.6%. As with the class claims, quantitative discounting specific to the PAGA claim is not provided or explained. (See, e.g., Mem. at 21 [“For example, Mr. Toney and Class Counsel discounted the theoretical estimated PAGA civil penalties in response to Defendants’ proffered multi-layered defenses, and further discounted these claims since the Court possesses wide discretion to reduce such penalties to as little as nothing even if Plaintiff ultimately prevailed.”].)

To be fair, PAGA claims are heavily discounted.

Among other things, a court has wide discretion (e.g., denying stacking penalties) in addition to merits considerations. For example, it is not unusual for PAGA discounting to range from 50-75% based on a variety of factors. Here, applying a not unusual 50-50-75-75 discount to the total PAGA valuation yields approximately $207,821. This would mean the PAGA claim was settled for approximately 4.8% of what could be a realistic valuation. At one point, counsel stated a 50-50-50-50 discount was applied to the overall valuation. Accordingly, despite counsel’s poor showing in the supplemental papers as to discounting, the settlement can be preliminarily approved. After the Notice goes out and, based on the objections and/or opt-outs, the Court is free to revisit this topic before Final Approval is granted.

2. What authority is there to release PAGA claims based on violations such as overtime and minimum wage violations that were not disclosed in the pre-filing notices to the LWDA?

RESOLVED. Pursuant to Labor Code §2699.3(a)(1)(A), a PAGA action shall commence only after “[t]he aggrieved employee or representative shall give written notice by online filing with the Labor and Workforce Development Agency…of the specific provisions of this code alleged to have been violated, including the facts and theories to support the alleged violation.” To satisfy this requirement, the notice must “state facts and theories supporting the alleged violations,” not simply list “a string of legal conclusions that parrot[s] the allegedly violated Labor Code provisions.” (Brown v. Ralphs Grocery Co. (2018) 28 Cal.App.5th 824, 837.)

Counsel fails to cite a single state court decision, relying solely on non-controlling Federal authority and provides no actual argument or discussion of how any portion of the LWDA notices, which I was forced to locate in prior filings, were sufficient to exhaust the overtime and minimum wage claims. (Mem. at 22–23.)

However, despite the abysmal showing by counsel, the claims were valued by the expert and class members are thus being compensated for the release of those claims. Additionally, these are not the main or most valuable claims and could arguably be seen as derivative of the meal and rest break claims which were alleged. Furthermore, it is typically a defendant’s role to assert lack of notice as a defense. Of course, that would not happen here as the parties stipulated to file an amended complaint to include these claims in order to extinguish them. Finally, the other consideration in terms of notice is whether the LWDA, with its “scarce” resources would have chosen to pursue this case with the addition of these claims in the notices. (Williams v. Superior Ct. (2017) 3 Cal. 5th 531, 545.) As that seems highly unlikely, this issue is resolved.

3. The First Amended Stipulation still reflects the incorrect date of January 6, 2017. As the error is in the stipulation between the parties, the Court cannot sue sponte correct it without approval from all parties.

RESOLVED. A Second Amended Stipulation has been executed and the date has been corrected. (ROA 137.)

RULING:

This is a putative class and PAGA action involving alleged wage/hour violations. This fourth hearing on the motion for Preliminary Approval of the Settlement was previously continued so that Plaintiff could address issues identified by the Court. (ROA 85, 106, 124.) Based upon the Court’s review of the supplemental materials, the motion for preliminary approval is GRANTED.  

Plaintiff is ORDERED to submit a revised Proposed Order that conforms to all aspects of this ruling in clean and redlined versions. The Proposed Order must (1) identify the operative Settlement by ROA number and (2) attach the Notice (including exhibited forms) as Exhibit 1. Do not attach the settlement to the Proposed Order and ensure all dates are correct.

At the Final Approval hearing, evidence of fees and actual costs should be presented in the form of time entries or a summary of time spent on the substantive tasks to enable the Court to evaluate the lodestar and the costs claimed. Counsel should state by declaration whether time records were kept and created contemporaneously or otherwise.  

The Final Approval hearing is set for 9/29/23 at 1:30 p.m. in Dept. CX103. All papers are due no later than 14 calendar days prior to the hearing.  

The Status Conference is continued to 9/29/23 at 1:30 p.m.

Plaintiff to give notice, including to the LWDA, and file proof of service within five calendar days of the date the Preliminary Approval Order is entered.  

The Court does not require any physical or remote appearance at the hearing scheduled for 06-16-23.   

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.