Judge Lynette Gridiron Winston, Case Number: 22PSCV00242, Date: 2024-05-21 Tentative Ruling

Judge: Lynette Gridiron Winston, Case: 22PSCV00242, Date: 2024-05-21 Tentative Ruling

Case Number: 22PSCV00242 Hearing Date: May 21, 2024 Dept: 6

CASE NAME: Jacqueline Alvarez v. Golden State Water Company

Plaintiff’s Motion to Approve PAGA Settlement

TENTATIVE RULING

The Court GRANTS Plaintiff’s motion subject to the modifications noted herein. The Court approves and awards the following: (1) $200,000 for attorney fees to Plaintiff’s counsel; (2) $11,508.12 in costs to Plaintiff’s counsel; (3) a service award in the amount of $5,000.00 to Plaintiff Jacqueline Alvarez; (4) $6,207.90 in settlement administration costs to ILYM Group; (5) no less than $282,962.98 (75% of $377,283.98) to LWDA; and (6) no less than $94,321.00 (25% of $377,283.98) to the PAGA Members.

The Court directs Plaintiff to submit a revised proposed order consistent with the modifications noted herein.

Plaintiff is ordered to give notice of the Court’s ruling within five calendar days of this order.

BACKGROUND

This is a representative action under the California Labor Code Private Attorneys General Act (PAGA). On March 15, 2022, plaintiff Jacqueline Alvarez, on behalf of the State of California as a private attorney general (Plaintiff), filed this action against defendant Golden State Water Company (Defendant) and Does 1 through 50, alleging various labor code violations.

On April 10, 2024, Plaintiff moved for the Court to approve settlement of the PAGA claim alleged against Defendant. The motion is unopposed.

LEGAL STANDARD

The PAGA is "a procedural statute allowing an aggrieved employee to recover civil penalties- for Labor Code violations-that otherwise would be sought by state labor law enforcement agencies." (Amalgamated Transit Union, Local 1756, AFL-CIO v. Superior Court (2009) 46 Cal.4th 993, 1003.) The statute provides a mechanism for private enforcement of Labor Code violations for the public benefit. (See Arias v. Superior Court (2009) 46 Cal.4th 969, 986.)

To incentivize employees to bring PAGA actions, the statute provides aggrieved employees 25 percent of the recovered civil penalties. (Lab. Code § 2699, subd. (i).) The remaining 75 percent is distributed to the Labor and Workforce Development Agency (LWDA) "for enforcement of labor laws and education of employers and employees about their rights and responsibilities under [the Labor Code]." (Lab. Code § 2699, subd. (i).)

Labor Code section 2699 provides in pertinent part:

(2) The superior court shall review and approve any settlement of any civil action filed pursuant to this part. The proposed settlement shall be submitted to the agency at the same time that it is submitted to the court.

(3) A copy of the superior court’s judgment in any civil action filed pursuant to this part and any other order in that action that either provides for or denies an award of civil penalties under this code shall be submitted to the agency within 10 days after entry of the judgment or order.

(Lab. Code, § 2699, subds. (l)(2), (l)(3).)

While PAGA requires court review and approval of settlements, it does not specify the standard or criteria for such review. (Moniz v. Adecco USA, Inc. (2021) 72 Cal.App.5th 56, 75.) Thus, “a trial court should evaluate a PAGA settlement to determine whether it is fair, reasonable, and adequate in view of PAGA's purposes to remediate present labor law violations, deter future ones, and to maximize enforcement of state labor laws.” (Id. at p. 77.) To determine if a PAGA settlement is fair, reasonable and adequate, courts consider factors “including the strength of the plaintiff's case, the risk, the stage of the proceeding, the complexity and likely duration of further litigation, and the settlement amount.” (Id. at p. 75.) Lastly, courts will also consider if the settlement is “adequate in view of PAGA's purposes to remediate present labor law violations, deter future ones, and to maximize enforcement of state labor laws.” (Ibid.) In considering the amount of settlement, the court is mindful that compromise is inherent and necessary in the settlement process. (Wershba v. Apple Computer, Inc. (2001) 91 Cal.App.4th 224, 250.)

DISCUSSION

Plaintiff moves for court approval of PAGA settlement under Labor Code section 2699, subdivision (l).

1) Summary of Settlement

The parties have agreed to settle the matter for the gross amount of $600,000. (Nordrehaug Decl., Ex. 1, ¶ 3.1.) From this, the following would be deducted: attorney fees ($200,000.00 or 33.33% of the gross settlement amount), litigation costs (up to $13,000.00), a service award to Plaintiff ($5,000), and settlement administration costs (up to $7,000). (Id., ¶¶ 3.2.1, 3.2.2, 3.2.3.) This leaves a net settlement amount of $375,000.00. Under Labor Code section 2699, subdivision (i), 75% is payable to the Labor and Workforce Development Agency (LWDA), and 25% is payable to the aggrieved employees. Thus, the sum of $281,250.00 is payable to the LWDA, and $93,750.00 will be divided among approximately 431 employees. (Nordrehaug Decl., ¶ 4; Id., Ex. 1, ¶ 3.2.4.)

2) Notice to the LWDA

Labor Code section 2699(l)(2) requires that the settlement be provided to the Labor Workforce Development Agency (LWDA) at the same time it is presented to the Court. Notice of the original settlement was provided to the LWDA on April 10, 2024. (See Proof of Service, 4/10/24.) Plaintiff’s counsel declares that the settlement has been served on the LWDA as verified in the proof of service. (Nordrehaug Decl., ¶ 13.) The LWDA has not opposed the settlement. "[PAGA] authorizes a representative action only for the purpose of seeking statutory penalties for Labor Code violations (Lab. Code, § 2699, subds. (a), (g)), and an action to recover civil penalties is fundamentally a law enforcement action designed to protect the public and not to benefit private parties." (Arias v. Superior Court (2009) 46 Cal.4th 969, 986.) There are no objections from any aggrieved employees or others.

3) Division of Civil Penalties

"[C]ivil penalties recovered by aggrieved employees shall be distributed as follows: 75 percent to the Labor and Workforce Development Agency for enforcement of labor laws, including the administration of this part, and for education of employers and employees about their rights and responsibilities under this code, to be continuously appropriated to supplement and not supplant the funding to the agency for those purposes; and 25 percent to the aggrieved employees." (Lab. Code, § 2699, subd. (i).)

As shown above, the settlement properly divides the net amount of civil penalties between the LWDA and aggrieved employees.

4) Breadth of Release

The release in the settlement agreement is as follows:

5.2. Release by PAGA Members: All PAGA Members are deemed to release, on behalf of themselves and their respective former and present representatives, agents, attorneys, heirs, administrators, successors, and assigns, the Released Parties from all “Released PAGA Claims.”

“Released PAGA Claims” means all claims for PAGA penalties that were alleged, or reasonably could have been alleged, based on the facts stated in the Operative Complaint and the PAGA Notice submitted by Plaintiff to the LWDA, which occurred during the PAGA Period, and expressly excluding all other claims, including claims for vested benefits, wrongful termination, violation of the Fair Employment and Housing Act, unemployment insurance, disability, social security, workers’ compensation, California class claims, and PAGA claims outside of the PAGA period. In no event shall the release of the Released PAGA Claims in this Settlement Agreement release any individual non-PAGA claims of any individuals.

(Nordrehaug Decl., Ex. 1, ¶ 5.2.)

The settlement agreement's release as to absent aggrieved employees is appropriately limited to claims for PAGA penalties based on the facts in the complaint and does not include any individual non-PAGA claims. This is an appropriately limited release.

The scope of Plaintiff's individual release is as follows:

5.1. Plaintiff’s Release. Plaintiff and her respective former and present spouses, representatives, agents, attorneys (including PAGA Counsel), heirs, administrators, successors, and assigns generally, release and discharge Released Parties from all claims, transactions, or occurrences that occurred during the PAGA Period, including, but not limited to: (a) all claims that were, or reasonably could have been, alleged, based on the facts contained in the Operative Complaint and the PAGA Notice (“Plaintiff’s Release”). Plaintiff’s Release does not extend to any claims or actions to enforce this Agreement, or to any claims for vested benefits, unemployment benefits, disability benefits, social security benefits, workers’ compensation benefits that arose at any time, claims that cannot be released as a matter of law, or based on occurrences outside the PAGA Period. Plaintiff acknowledges that Plaintiff may discover facts or law different from, or in addition to, the facts or law that Plaintiff now knows or believes to be true but agrees, nonetheless, that Plaintiff’s Release shall be and remain effective in all respects, notwithstanding such different or additional facts or Plaintiff’s discovery of them.

5.1.1 Plaintiff’s Waiver of Rights Under California Civil Code Section 1542. For purposes of Plaintiff’s Release, Plaintiff expressly waives and relinquishes the provisions, rights, and benefits, if any, of section 1542 of the California Civil Code, which reads: A general release does not extend to claims that the creditor or releasing party does not know or suspect to exist in his or her favor at the time of executing the release, and that if known by him or her would have materially affected his or her settlement with the debtor or Released Party.

(Nordrehaug Decl., Ex. 1, ¶¶ 5.1, 5.1.1.)

This release is likewise acceptable.

5) Fair, Reasonable, and Adequate

Plaintiff argues that the settlement should be found to be fair and reasonable for various reasons: Plaintiff complied with the necessary Labor Code administrative requirements, the settling parties reached a compromise through arms-length negotiations, sufficient investigation and discovery by experienced counsel to act competently in negotiating settlement, the settlement is reasonable in light of the parties' legal positions, the risk of continued litigation, and the underlying purpose of the PAGA. (Motion, pp. 12-17; Nordrehaug Decl., ¶¶ 3-16.)

Under Dunk v. Ford Motor Co. (1996) 48 Cal.App.4th 1794, a presumption of fairness exists where "(1) the settlement is reached through arm's-length bargaining; (2) investigation and discovery are sufficient to allow counsel and the court to act intelligently; (3) counsel is experienced in similar litigation; and (4) the percentage of objectors is small." (Id. at 1802.)

First, the settlement appears to have been reached through arm's-length bargaining. The parties attended mediation with Hon. Daniel Buckley (Ret.) in June 2023, reaching a settlement pursuant to the mediator's proposal. (Nordrehaug Decl., ¶ 3.) Plaintiff’s counsel describes the investigation and discovery performed in the case, including interviews with Plaintiff and review of Defendant’s production of policies, practices, and procedures, as well as records and data to determine the number of PAGA members and the number of relevant pay periods. (Nordrehaug Decl., ¶¶ 3, 6; Alvarez Decl., ¶ 5.) Plaintiff's counsel has extensive experience with this type of litigation. (Nordrehaug Decl., ¶¶ 7, 10-12.) There are no objectors. The settlement is therefore presumptively fair.

6) Civil Penalties

Plaintiff's briefing allows this Court to determine that the investigation and discovery by Plaintiff supports the settlement. Plaintiff seeks civil penalties for six different violations of the Labor Code. Plaintiff explains Defendant’s potential PAGA exposure is $2,066,00.00 for 20,660 pay periods. (Nordrehaug Decl., ¶ 6.) Plaintiff then suggests the actual potential recovery would likely be lower, that these calculations were performed at the maximum statutory rate for penalties and the difficulty in proving that each PAGA member suffered a violation for each period the employee worked in relation to the violations at issue. (Nordrehaug Decl., ¶¶ 6-7.) Plaintiff also suggests the actual potential recovery would likely be lower considering the risk of not prevailing on the merits and the Court’s discretion to reduce penalties. (Motion, 13:12-14:11.) Plaintiff further notes that Defendant disputes having violated the Labor Code, that Defendant asserted additional defenses to both liability and the amount of the penalties, and that Defendant could argue no penalties before the PAGA notification should be awarded because the violations were not intentional, and at least one Court has so ruled. (Nordrehaug Decl., ¶ 7.)

The Court finds that the civil penalties agreed upon are fair and reasonable. While the total award results in only $29 penalties per pay period ($600,000.00 award divided by 20,660 pay periods in the PAGA period (Nordrehaug Decl., ¶ 6)), the Court finds this appropriate as it considers the legal issues in this case and the risk to the parties in proceeding to trial. The Court also finds this settlement is adequate under PAGA, as other courts have imposed even smaller penalties. (See, e.g., Carrington v. Starbucks Corp. (2018) 30 Cal.App.5th 504, 517 [where violations were minimal and compliance was attempted, court imposed a penalty of $5 per violation].)

7) Attorney Fees and Costs

Under Labor Code section 2699, subdivision (g), an employee who prevails in a PAGA action is entitled to an award of attorney fees and costs. (Lab. Code, § 2699, subd. (g).) Here, Plaintiff requests attorney fees in the amount of $200,000.00 (33.33% of the gross settlement amount) and litigation costs in the amount of $13,000. (Marquez Decl., ¶ 21.) Plaintiff indicates the lodestar amount in this case is $149,587.50 and requests a multiplier of 1.3. (Nordrehaug Decl., ¶ 8.) In reviewing such fee enhancements, the court considers the risk of contingency, exceptional skill, and other factors such as the novelty or difficulty of the issues. (See Ketchum v. Moses (2001) 24 Cal.4th 1122, 1138 (Ketchum); Serrano v. Priest (1977) 20 Cal.3d 25, 49.) However, factors such as experience and skill are not considered if already recognized by the lodestar. (Ketchum, supra, 24 Cal.4th at p. 1138.)

Here, Plaintiff’s lodestar is based on the billing rate of Plaintiff’s counsel. (Nordrehaug Decl., ¶¶ 8, 12, Ex. 2.) Thus, the Court finds the skill and experience of Plaintiff’s counsel has already been accounted for by the lodestar. As for enhancement factors, Plaintiff’s counsel took a risk by taking this case on contingency. (Nordrehaug Decl., ¶ 8.) Plaintiff’s counsel also estimates an additional $10,000.00 to $20,000.00 in fees for managing the completion of the settlement. (Nordrehaug Decl., ¶ 8.) The Court finds the 1.3 multiplier to be appropriate here. As for costs, Plaintiff provided an itemization of the costs incurred in this case ($11,508.12), which falls below the maximum of $13,000 allowed by the settlement agreement. (Nordrehaug Decl., ¶ 9, Ex. 2.)

Accordingly, the Court finds the award of attorney fees and costs in the settlement agreement are fair and reasonable.

Because the litigation costs are only $11,508.12, the Court ORDERS $1,491.88 of the litigation expense allocation of $13,000.00 returned to the net settlement amount and to be factored in recalculating the payments to the LWDA and aggrieved employees.

8) Service Award

While a plaintiff may receive reasonable enhancement payments as a class representative, courts must balance such an award between the interests of compensating the plaintiff for the expense or risk they incurred in bringing the suit while avoiding creating a perverse incentive for the plaintiff to accept suboptimal settlements in exchange for a higher enhancement payment. (See Munoz v. BCI Coca-Cola Bottling Co. of Los Angeles (2010) 186 Cal.App.4th 399, 412.)

The settlement agreement awards Plaintiff a service award of $5,000.00, which Plaintiff has requested. (Nordrehaug Decl., Ex. 1, ¶ 3.2.1; Alvarez Decl., ¶ 10.) In support of this request, Plaintiff submitted a declaration stating that Plaintiff spent approximately 30-40 hours meeting with attorneys over the case and has been actively involved in the litigation and settlement process. (Alvarez Decl., ¶ 8.) Plaintiff also stated an awareness of the professional and financial risks of bringing a PAGA action. (Alvarez Decl., ¶ 6.)

Considering the Plaintiff’s involvement and risk taken, the Court finds the service award of $5,000.00 to be reasonable. (See Uribe v. Crown Building Maintenance Co. (2021) 70 Cal.App.5th 986, 995, 998 [noting trial court reduced request for $10,000 enhancement award in a $370,000 PAGA settlement to $5,000].)

9) Settlement Administration and Costs

The proposed settlement contemplates using the services of ILYM Group Inc. (ILYM) as the neutral party that will administer the settlement. (Nordrehaug Decl., ¶ 14, Settlement Agreement, §§ 1.2, 7.1-7.4.) ILYM is allocated $7,000 for its services per the terms of the settlement agreement. (Motion, 9:5-15; Nordrehaug Decl., Ex. 1, ¶ 3.2.3.)

ILYM provided a declaration from Anthony Rogers, ILYM's Senior Vice President, which explains the qualifications and experience of ILYM to be an administrator, and procedures for notice preparation and distribution. (Rogers Decl., ¶¶ 1-7, Exs. A-C [respectively, ILYM's company curriculum vitae, security summary and protocol, and breakdown of fee not to exceed $6,207.90].)

The Court GRANTS the settlement insofar as it seeks appointment of ILYM Group, Inc. as the settlement administrator. ILYM Group, Inc. is ORDERED APPOINTED as settlement administrator.

Because ILYM will only charge $6,207.90 for its services, the Court ORDERS $792.10 of the administrator fee allocation of $7,000 returned to the net settlement amount and to be factored in recalculating the payments to the LWDA and aggrieved employees.

Lastly, the Court notes that no objections to the proposed settlement appear in Plaintiff’s papers and none have been filed with the Court. The Court thus finds that the proposed settlement is fair, reasonable, and adequate to all concerned.

Based on the foregoing, the Court GRANTS the motion. For the sake of clarity and in light of the modifications to some of the amounts noted herein, the new net settlement amount is now $377,283.98, i.e., $375,000.00 plus $2,283.98 returned from litigation costs ($1,491.88) and settlement and administration costs ($792.10).

CONCLUSION

The Court directs Plaintiff to submit a revised proposed order consistent with the modifications noted herein.

Plaintiff is ordered to give notice of the Court’s ruling within five calendar days of this order.