Judge Lon F. Hurwitz, Case 22-01262282 2024-04-05 Tentative Ruling

Judge: Lon F. Hurwitz, Case: 22-01262282, Date: 2024-04-05 Tentative Ruling

Motion for Approval of Class Settlement

Motion for Preliminary Approval of Class Action and PAGA Settlement

Moving Party: Plaintiff Nadia Estrada

Responding Party: None (unopposed)

SERVICE: June 1, 2023, by electronic mail

RELIEF SOUGHT: Plaintiff seeks: (1) preliminary approval of the proposed Joint Stipulation of Class Action and PAGA Settlement; (2) provisional certification of the proposed Class for settlement purposes; (3) appointment of Plaintiff as Class Representative for settlement purposes;(4) appointment of Class Counsel for settlement purposes; and (5) appointment of ILYM Group, Inc. as the Settlement Administrator.

UPCOMING EVENTS: None

FACTS/OVERVIEW: This is a putative wage-and-hour class and PAGA action. On May 31, 2022, Plaintiff Nadia Estrada, individually and on behalf of other members of the general public similarly situated and on behalf of other aggrieved employees pursuant to the California Private Attorneys General act (“Plaintiff”), filed a Complaint against Defendant Belshire Environmental Services, Inc. (“Defendant”). (ROA 2). The Complaint alleges the following 11 causes of action:

1. Violation of Labor Code §§ 510 and 1198 (Unpaid Overtime);

2. Violation of Labor Code §§ 226.7 and 512(a) (Unpaid Meal Period Premiums);

3. Violation of Labor Code § 226.7 (Unpaid Rest Period Premiums);

4. Violation of Labor Code §§ 1194, 1197, and 1197.1 (Unpaid Minimum Wages);

5. Violation of Labor Code §§ 201 and 202 (Final Wages Not Timely Paid);

6. Violation of Labor Code § 204 (Wages Not Timely Paid During Employment);

7. Violation of Labor Code § 226(a) (Non-Compliant Wage Statements);

8. Violation of Labor Code § 1174(d) (Failure to Keep Requisite Payroll Records);

9. Violation of Labor Code §§ 2800 and 2802 (Unreimbursed Business Expenses);

10. Violation of Business & Professions Code §§ 17200, et seq.; and

11. Violation of Labor Code § 2698, et seq. (PAGA)

Shortly after the Complaint was filed, counsel met and conferred regarding resolution of the matter. The parties agreed to exchange informal discovery, engage in private mediation, and stay formal discovery pending the completion of mediation. [Declaration of S. Emi Minne (“Minne Decl.”) (ROA 49), ¶ 7.]

On March 27, 2023, the parties participated in a private mediation with Steven J. Rottman, Esq., a mediator with extensive experience in complex wage and hour litigation.

On June 1, 2023, Plaintiff filed the current Motion for Preliminary Approval of Class Action and PAGA Settlement. (ROA 48). No party has filed a motion to compel arbitration. There is no discovery order or stipulation for discovery. This is the first hearing on this matter.

SUMMARY OF SETTLEMENT:

A fully executed copy of the Joint Stipulation of Class Action and PAGA Settlement (“Settlement”) between Plaintiff and Defendant is attached as Exhibit 1 to counsel’s declaration. [See, Declaration of S. Emi Minne (“Minne Decl.”) (ROA 49).]

Class Definition: “All current and former hourly-paid, non-exempt employees of Defendant who were employed by Defendant in the State of California at any time during the Class Period.” [Settlement, ¶ 6.]

“Class Period” is period commencing on May 31, 2018, and ending on the earlier of: (a) the date of preliminary approval, or (b) May 31, 2023. [Settlement, ¶ 7.]

Estimated Class Size: 204 individuals

PAGA Members Definition: “All current and former non-exempt employees of Defendant who were employed by Defendant in the state of California at a time during the PAGA Period.” [Settlement, ¶ 22.]

“PAGA Period” means the period commencing on March 23, 2021, and ending on the earlier of: (a) the date of preliminary approval, or (b) May 31, 2023. [Settlement, ¶ 24.]

Gross Settlement Amount (“GSA”): $750,000.00 GSA does not include employer-side taxes and withholdings. [Settlement, ¶¶ 15, 56.]

$ 262,500.00 Attorneys’ fees

$ 30,000.00 Litigation costs (not to exceed)

$ 7,500.00 Plaintiff Enhancement

$ 10,000.00 Administration costs (not to exceed)

$ 50,000.00 PAGA Penalties (75% or $37,500.00 to LDWA; 25% or $12,500.00 to PAGA Members)

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$ 390,000.00 Estimated Net Settlement Amount (“NSA”) [Minne Decl., ¶¶ 17-19; Settlement, ¶¶ 4, 8, 52-56.]

Escalator Clause: GSA based on 21,361 Workweeks between May 31, 2018 and March 27, 2023. Should actual number of Workweeks for Class Members exceed this amount by more than 10% (i.e., increase of more than 2,136 Workweeks), then Defendant has the option to either: (a) increase the GSA proportionally to the percentage increase in actual number of Workweeks; or (b) shorten the Class Period and PAGA Period to the date on which the number of Workweeks reaches 23,497. [Settlement, ¶ 49.]

ISSUE: Defendant not allowed to shorten Class Period and PAGA Period in Escalator Clause. Also need to state if Escalator Clause has been triggered, what were the number of Workweeks at that date, and what are the number of Workweeks presently.

Definition of both Class and PAGA periods should be amended to state that they end on May 31, 2023, since preliminary approval will happen after that date. Use of date certain will alleviate the need for additional inquiries regarding Class and PAGA group size.

Payments to Class:

How Calculated? Pro rata based on number of total Workweeks during Class Period. [Settlement, ¶ 57.]

Individual PAGA Payments – pro rata based on total number of Workweeks worked by PAGA Members during PAGA Period. [Settlement, ¶ 59.]

Reversion? No. [Settlement, ¶ 48.]

Taxation? Defendant separately responsible for all applicable employer-side payroll taxes.

Individual Class Payments allocation: 20% wages, 40% interest, 40% penalties. Portion allocated to wages will be reported on IRS Form W-2. Non-wage payments reported on IRS Form-1099. [Settlement, ¶ 58; Minne Decl., ¶ 22.]

Individual PAGA Payments not subject to withholdings. Will be reported on IRS Form-1099. [Settlement, ¶ 60.]

Uncashed After 180 days, funds from uncashed Checks? Settlement checks will be distributed to State Controller’s Unclaimed Property Fund. [Settlement, ¶ 77.]

Average Pymt.: $1,911.76 Individual Class Payment (low approx. $18.26; high approx. $4,765.23; Plaintiff approx. $529.54). [Minne Decl., ¶ 21.]

Average Individual PAGA Payment approx. $83.89. [Minne Decl., ¶ 23.]

CERTIFICATION OF CLASS:

The party seeking class certification must establish three things: “(1) the existence of an ascertainable and sufficiently numerous class, (2) a well-defined community of interest, and (3) substantial benefits from certification that render proceeding as a class superior to the alternatives.” (Brinker Restaurant Corp. v. Sup.Ct. (2012) 53 Cal.4th 1004, 1021.)

It appears that these elements are met, and the proposed class can be conditionally certified for settlement purposes. The parties agree to conditional certification of the class for settlement purposes. The class appears to be ascertainable, sufficiently numerous, and well-defined.

SETTLEMENT ISSUES:

1. Class Members Release: Upon the funding of the GSA, Participating Class Members shall fully release and discharge the Released Parties from any and all Released Class Claims for the Class Period. Release is binding on all Participating Class Members. [Settlement, ¶ 83.]

“Released Class Claims” means “all claims, rights, demands, liabilities and causes of action that are alleged, or reasonably could have been alleged based on the factual allegations and claims asserted in the operative Complaint in this action arising during the Class Period,” including the specific causes of action alleged in the Complaint. [Settlement, ¶ 30.]

“Released Parties” means Defendant “and its past, present and/or future, direct and/or indirect, officers, directors, members, managers, employees, agents, representatives, attorneys, insurers, partners, investors, shareholders, administrators, parent companies, subsidiaries, affiliates, divisions, predecessors, successors, assigns, and joint venturers.” [Settlement, ¶ 32.]

2. PAGA Members Release: All PAGA Members, the LWDA, and State of California shall fully release and discharge the Released Parties from any and all PAGA Claims for the PAGA Period. All PAGA Members shall release claims arising under PAGA regardless of decision to participate in Class settlement. PAGA Members excluded from settlement of class claims shall still receive an Individual PAGA Payment and release all claims for penalties pursuant to PAGA during the PAGA Period. [Settlement, ¶ 84.]

“Release PAGA Claims” means “any and all claims for the recovery for civil penalties, attorneys’ fees and costs permissible under PAGA which Plaintiff and/or the PAGA Members had, or may claim to have, against Released Parties, arising out of the violations alleged in the Complaint or the PAGA Notice during the PAGA Period,” including all of the specific causes of action alleged in the Complaint. [Settlement, ¶ 31.]

ISSUE: Plaintiff has not provided a copy of the LWDA letter.

3. Release of Additional Claims by Plaintiff: Plaintiff agrees, on behalf of herself only, to fully release the Released Parties from any and all Released Claims. She also generally releases and discharges the Released Parties from any and all claims, demands, obligations, causes of action, rights, or liabilities of any kind which have been or could have been asserted against the Release Parties arising out of or relating to her employment by Defendant, including, but not limited to, claims for wages, restitution, penalties, retaliation, defamation, discrimination, harassment or wrongful termination of employment. Release specifically includes any and all claims, demands, obligations and/or causes of action for damages, restitution, penalties, interest, and attorneys’ fees and costs (except provided by Settlement Agreement) relating to matters referred to in Settlement, whether or not known or suspected to exist, and whether or not specifically described in the Settlement. [Settlement, ¶ 85.]

ISSUE: Plaintiff’s release should not include waiver of right to bring FEHA-related claims for retaliation, harassment, and discrimination because they are not related to or implicated by the facts alleged in the operative Complaint.

4. Valuation of Claims: The parties exchanged documents and information before mediating this matter. Defendant produced a 20% sampling of timekeeping and payroll records for Class Members, as well as employee handbooks and other documents regarding wage-and-hour policies and procedures. Defendant also produced data points regarding size and composition of Class, including number of Class and PAGA Members, total number of workweeks and pay periods worked by Class Members, number of pay periods worked by PAGA Members, and average pay rate for the Class. [Minne Decl., ¶ 8.]

It was determined that Class Members worked a total of 204 Class Members who worked a total of 21,361 Workweeks during the Class Period, with average hourly pay of $24.83. Using data provided, counsel prepared assessment of Defendant’s potential liability, with the assistance of a data analysis expert. [Minne Decl., ¶¶ 9, 27.]

The valuation analysis is as follows [see, Minne Decl., ¶¶ 26-51]:

• Maximum potential class-wide liability approx. $3,842,194.99. Penalties associated with violations of Labor Code §§ 204 and 1174 not considered as part of Class analysis, but included in separate calculations regarding Defendant’s potential exposure for PAGA.

• Unpaid Overtime and Minimum Wages: Average underpayment of 1 hour per week. Maximum potential liability of $795,697.25. Discount 70% for risks associated with class certification, and 50% for risks associated with prevailing at trial. Adjusted estimated liability of $119,354.59.

• Meal Period Violations: Approximately 41.3% of recorded shirts reflected at least one meal period violation. Maximum potential liability of $876,210.28. Discount of 50% for risks associated with class certification, and 50% for risks associated with prevailing on the merits. Adjusted estimated liability of $219,052.57.

• Rest Period Violations: Violation rate of at least 50%. Maximum potential liability of $1,060,787.26. Discount of 70% for risks associated with class certification, and 50% for risks associated with prevailing on the merits. Adjusted estimated liability of $159,118.09.

• Unreimbursed Business Expenses: Class members not reimbursed for costs associated with remote work, and are owed at least $5.00 per workweek for these expenses. Maximum potential liability of $106,805.00. Discount 50% for risks associated with class certification, and 50% for risks associated with prevailing on the merits. Adjusted estimated liability of $26,701.25.

• Waiting Time Penalties: Approximately 81 Class Members who were terminated within 3-year statutory period. Maximum potential liability of $482,695.20. Discount 50% for risks associated with class certification, and 50% for risks associated with prevailing on the merits. Adjusted estimated liability of $120,673.80.

• Wage Statement Penalties: Approx. 130 Class Members employed during statutory period. Maximum potential liability $520,000.00. Discount 50% for risks associated with class certification, and 70% for risks associated with prevailing on the merits. Adjusted estimated liability of $774,900.30

• PAGA: Maximum potential exposure of $4,614,755.20 in civil penalties: $456,950.00 for unpaid overtime; $913,900.00 for unpaid minimum wages; $436,844.20 for meal period violations; $904,761.00 for rest period violations; $913,900.00 for failure to timely pay wages during employment; $74,500.00 for failure to maintain required payroll records; and $913,0900.00 for failure to reimburse business expenses. Discount 50% for risks associated with prevailing on the merits, 50% for risks associated with manageability, and 70% discount for risks created by uncertainties regarding method for assessing penalties. Adjusted estimated liability of $346,106.64.

Defendant faces risk-adjusted liability of 4774,900.30 for Class claims, and $346,106.64 for PAGA claims.

GSA of $775,564.00 represents 19.5% of maximum value of direct Class claims. Allocation of $50,000.00 to PAGA penalties represents 6.67% of the GSA.

ISSUE: Wage Statement Penalties adjusted amount after discount is inconsistent with maximum potential liability amount. Settlement does not appear to be reasonable; risk-adjusted liability amount is low compared to maximum potential liability.

5. Requests for Exclusion

“Response Deadline” is last date on which Class Members may submit opt-out request via email, facsimile, or mail. It is 60 days after Class Notice is mailed. Extended 15 days for remailing. [Settlement, ¶ 34.]

ISSUE: Time period for remailed notices should be at least 45 days.

Section discussing Requests for Exclusion states written request may be sent via email, facsimile, or mail. Date of email, fax, or postmark is exclusive means to determine whether opt-out request is timely. Settlement Administrator will “certify” to counsel that opt-out requests were timely submitted.

If opt-out request is defective, Class Member will be given opportunity to cure. Cure letter mailed within 3 business days after receipt of defective submission. Class Member will have 15 calendar days to cure. If Class Member responds to cure letter with a defective claim, Settlement Administrator has no further obligation to notice of need to cure.

No earlier than 20 days or later than 30 days after mailing of Class Notice, Settlement Administrator will send reminder to all Class Members who have not submitted opt-out request. Reminder postcard will include Response Deadline and contact information for Class Counsel and Settlement Administrator.

Class Members who do not opt-out will be bound by terms of the Settlement. Opt out not effective as to release of PAGA claims. [Settlement, ¶¶ 68, 69, 73.]

ISSUE: Settlement must provide that the Court ultimately decides the validity and authenticity of Requests for Exclusion.

6. Objections to Settlement

Participating Class Members must email, fax, or postmark objection on or before Response Deadline. Must include specific reason, including any legal grounds, for objection. Email, facsimile, or postmark date deemed exclusive means for determining if objection is timely. Class Members who fail to object will be foreclosed from making a written objection, but will still have right to appear at Final Approval hearing to orally state objections. [Settlement, ¶ 72.]

ISSUE: Deadline after remailing should be 45 days. Settlement must provide that Court retains final authority as to consideration and admissibility of objections.

7. Disputes

Class Members must submit evidence to Settlement Administrator showing that number of Workweeks they have been credited or the amount of the Individual Class Payment is inaccurate. Absent evidence rebutting Defendant’s records, Defendant’s records will be presumed determinative. Parties will evaluate evidence submitted by the Class Member, and the Parties will make the final decision as to the number of eligible Workweeks that should be applied and/or the Individual Class Payment to which the Class Member may be entitled. If Parties unable to resolve dispute, the Settlement Administrator will be final arbiter of the Workweeks for the Class Member. [Settlement, ¶ 67.]

ISSUE: Settlement does not explain process for how Class Members may submit disputes to the Settlement Administrator.

8. Attorneys’ Fees and Costs

Class Counsel will receive fees of not more than 35% of the GSA, i.e., $260,500.00, plus reimbursement of costs not to exceed $30,000.00. Any portion of fees and costs not awarded to Class Counsel will be reallocated to the NSA and distributed to Participating Class Members. [Settlement, ¶ 52.]

ISSUE: Fees of 35% of GSA is higher than usual 33.33%. At Final Approval, counsel must provide billing records in support of its fees, as well as documentation of costs. Counsel must also disclose whether there is a fee-splitting arrangement with any other counsel, or confirm none exists. (CRC Rule 3.769(b)).

9. Enhancement

Named Plaintiff shall receive enhancement of $7,500.00. Any portion of enhancement that is not awarded to Named Plaintiff shall be reallocated to the NSA and distributed to Participating Class Members. [Settlement, ¶ 53.]

ISSUE: Enhancement amount is higher than usual $5,000.00 payment. At Final Approval, Plaintiff should submit declaration describing circumstances to justify enhancement, and addressing the factors set forth in Golba v. Dick’s Sporting Goods, Inc. (2015) 238 Cal.App.4th 1251, 1272, and Clark v. Am. Residential Servs., LLC (2009) 175 Cal.App.4th 785, 804, including an estimate of the hours spent on this litigation.

10. Settlement Administration

Parties have chosen ILYM Group, Inc. as the Settlement Administrator. Settlement Administrator will be paid for reasonable costs of administration, estimated not to exceed $10,000.00. If costs exceed current estimate, additional costs will be taken from GSA. Any portion of costs not awarded or that are not required to complete administration of Settlement shall be reallocated to NSA and distributed to Participating Class Members. Settlement Administrator must post notice of final judgment online at its website.

Within 2 weeks of Response Deadline, Settlement Administrator will provide declaration to counsel regarding compliance with obligations under the Settlement. Settlement Administrator shall also provide authenticated copies of all written objections and opt-out requests it received.

Within 10 days after disbursement of all funds in GSA, Administrator will provide counsel with final report detailing the disbursements. At least 14 days before any deadline set by Court, Administrator will prepare and submit to counsel a signed declaration attesting to disbursement of all payments required under the Settlement. Class Counsel is responsible for filing Administrator’s declaration with the Court.

[Settlement, ¶¶ 36, 54, 62.l., 75, 79.]

ISSUE: Settlement does not discuss whether Administrator must post operative Complaint, Settlement, Class Notice, and Orders for Preliminary Approval online. Administrator’s invoice should be provided at Final Approval.

11. Notice to LWDA

Counsel attests written notice was provided to the LWDA on March 23, 2022. [Minne Decl., ¶ 5.]

ISSUE: Plaintiff has not provided copy of the LWDA letter.

12. Continuing Jurisdiction

Paragraph 89 of the Settlement provides that after entry of Final Approval Order, Court will have continuing jurisdiction solely for purposes of addressing interpretation and enforcement of Settlement, Settlement administration matters, and post-judgment matters as may be appropriate under Court rules or as set forth in Settlement.

ISSUE: Settlement should state that continuing jurisdiction is pursuant to CCP § 664.6 and CRC Rule 3.769(h).

ISSUES RE CLASS NOTICE:

The proposed Class Notice is attached as Exhibit A to the Settlement. The Class Notice is to be provided in both English and Spanish. [Settlement, ¶ 66.] There are a few issues that should be addressed:

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

2. Title of Class Notice should refer to Class and PAGA Action Settlement.

3. Section 5 (regarding calculation of Individual Class and PAGA payments) should advise that the Court may review the Administrator’s decisions on disputes.

4. Section 7 should include an end date for the Class Release as well as the time frame for the PAGA release.

5. Section 12 regarding objections should provide information about the location of the Final Approval Hearing (court address and department number).

ISSUES RE PROPOSED ORDER: (ROA 44)

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

2. Paragraph 13 should read “Final Approval hearing” instead of “final fairness hearing.”

3. Paragraph 13 should state that Class Members who are PAGA Members cannot opt out of the PAGA Settlement, will be bound by the PAGA release, and will receive their Individual PAGA Payments.

4. Paragraph 13 should be revised so its clear that the Class Members may submit written objections as set forth in the Settlement Agreement and Class Notice or, in the alternative, appear in person or through counsel to object orally at the Final Approval Hearing.

5. Paragraph 16 should read “Department CX103.”

6. Paragraph should be added stating that Class Members may submit disputes.

7. Should include requirement that Settlement Administrator must provide a copy of its invoice with its declaration regarding administration of the Settlement.

RULING:

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 and/or an OSC re Sanctions for failure to follow the Court Orders issued hereinabove pursuant to CCP Section 177.5.

Clerk to give Notice.