Judge Lynette Gridiron Winston, Case Number: 23PSCV00951, Date: 2024-08-06 Tentative Ruling

Judge: Lynette Gridiron Winston, Case: 23PSCV00951, Date: 2024-08-06 Tentative Ruling

Motion for an Order Approving Settlement of Claims Brought Pursuant to the Private Attorneys General Act, Award of Attorneys’ Fees and Costs & Reimbursement of Settlement Administration Expenses

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

This is a PAGA case. On April 3, 2023, plaintiffs Xiang Li and Ke Jiang (collectively, Plaintiffs) filed this action against defendants Armlogi Truck Dispatching LLC, Tong Wu, Amstrong Logistic Inc (collectively, Defendants) and Does 1 through 15. On May 26, 2023, Plaintiffs filed the operative First Amended Complaint against the same Defendants, alleging causes of action for whistle blower retaliation, sick leave retaliation, wrongful termination of public policy, non-payment of wages, failure to timely pay wages, recordkeeping violations, and waiting time penalties.

On June 20, 2024, Plaintiffs moved for an order approving settlement of Plaintiffs’ PAGA claims. The motion is unopposed.

The Private Attorneys General Act (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).)

(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.

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.)

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

The parties have agreed to settle the matter for the gross amount of $20,000. (Bluer Decl., Ex. C, § 4.02, subd. (a).) From this, litigation costs totaling $1,635.00, comprised of a $1,500.00 settlement administration fee and $135.00 in costs advanced by Plaintiffs’ counsel, would be deducted. (Id., ¶ 13.) This would leave $18,365.00, from which Plaintiffs’ counsel would take a 1/3 contingency fee, i.e., $6,121.00. (Id.) This would then leave $12,244.00 to be divided 75/25 between the Labor and Workforce Development Agency (LWDA) and the aggrieved employees, respectively, per Labor Code section 2699, subdivision (i). (Lab. Code, § 2699, subd. (i).)[1] Thus, the sum of $9,183.00 is payable to the LWDA, and $3,061.00 will be divided among 16 employees. (Bluer Decl., ¶¶ 4, 15; Id., Ex. C, § 1.01, subd. (a).) The Court also notes that Plaintiffs separately settled their individual claims with Defendants for $77,700.00 and $107,300.00 for Plaintiffs Jiang and Li, respectively. (Bluer Decl., ¶ 15.)

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. (Lab. Code, § 2699, subd. (l)(2).) Plaintiffs presented no evidence that the notice of the original settlement was provided to the LWDA at the same time it was presented to the Court. (See generally, Bluer Decl.) This by itself is sufficient grounds to deny the motion.

"[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.

Upon Court approval of the Settlement, dismissal of the Action, and subject to Defendants’ funding in full of the PAGA Gross Settlement Amount, Plaintiffs and the Aggrieved Employees will fully and finally release and discharge Defendants and its former, present, and future owners, parents, affiliates, and subsidiaries, Tong Wu, and all of their current, former, and future officers, directors, members, managers, partners, shareholders, agents, employees, joint ventures, successors, assigns, attorneys, accountants, insurers, or legal representatives (the “Released Parties”), from all claims, rights, demands, liabilities, and causes of action for civil penalties under the PAGA that arose during the PAGA Release Period that were alleged in the Action, including but not limited to the following claims: (a) failure to pay for all hours worked, including at the correct rate of pay, including minimum wages and overtime wages; (b) failure to provide accurate itemized wage statements; (c) failure to maintain accurate records; (d) failure to timely pay all wages owed each pay period and upon separation; (e) violations of paid sick leave laws and regulations; (f) violations of Labor Code section 1102.5; (g) all claims for PAGA penalties that could have been premised on the facts, claims, causes of action, or legal theories described above; and (h) all other claims under PAGA that could have been premised on the facts, claims, causes of action, or legal theories described above and in Plaintiffs’ LWDA Letter and the operative Complaint, including but not limited to Labor Code sections 201, 202, 203, 204, 210, 218.5, 218.6, 226, 226.3, 246.5, 510, 558, 1102.5, 1174.5, 2698, and 2699 (the “Released Claims”).

Plaintiffs and the State of California shall be deemed to have, and by operation of the Order and Final Judgment granting approval of this Agreement, shall have fully, finally, and forever released, relinquished, and discharged each and all of the Released Parties from the Released Claims that arose during the PAGA Release Period. As a result of this release, the Aggrieved Employees will be unable to bring a claim under, or recover in any other claim brought under the

PAGA for any violations of the Released Claims that took place during the PAGA Period.

The Court finds the settlement agreement's release to be fair, as it is limited to PAGA claims for penalties based on facts alleged in the complaint limited to the PAGA Release Period, i.e. May 26, 2022 through the date the Court approves the PAGA settlement. (Bluer Decl., Ex. C, § 1.01, subd. (a).) This release language also does not include any individual non-PAGA claims within its scope, which is particularly important for the absent aggrieved employees.

Plaintiffs argues that the settlement is just and in the public interest considering the small number of employees in this PAGA class, i.e., 16. Plaintiffs note that Defendants have disputed many of the allegations and that many of the alleged violations could not have been proven without extensive litigation. Plaintiffs indicate that many of the several alleged PAGA violations were involved one-time penalties, which were given less weight. Plaintiffs state that the evidence did not sufficiently show the willful intent necessary to prevail on some of the claims, e.g., sick leave retaliation, whistle blower retaliation, and waiting time penalties. Plaintiffs suspect that continued litigation would have been cost prohibitive. Plaintiffs therefore contend the settlement amount of $20,000.00 reasonably values the alleged PAGA violations. (Motion, 4:23-5:18.)

Plaintiffs note that Plaintiffs secured a sizeable amount in light of the small number of aggrieved employees and pay periods and is in line with similar settlements for these types of claims. Plaintiffs also contend these PAGA penalties would constitute an unexpected windfall to the aggrieved employees, who typically do not bring individual lawsuits seeking PAGA penalties only. Plaintiffs note that the settlement also requires that each employee receive a notice that describes this litigation and the settlement amount they are receiving, which will educate aggrieved employees as to the requirements of the Labor Code and thereby promote the public interest consistent with PAGA’s purpose. Plaintiffs also argue that public policy strongly favors the settlement of litigation. (Motion, 6:2-14.)

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 p. 1802.)

The settlement appears to have been reached through arm's-length bargaining. The parties attended mediation with Stephen Mehta, Esq. in April 2024, wherein the parties entered into settlement agreements for both the individual and PAGA claims. (Bluer Decl., ¶ 5.) Plaintiffs’ counsel describes the investigation and discovery performed in the case, including investigation into the factual and legal issues, interviewing Plaintiffs who do not speak fluent English, working on case strategy and analysis, drafting formal discovery requests, preparing informal discovery requests and reviewing documents informally provided by Plaintiffs, meeting and conferring with opposing counsel related to discovery, preparing for and attending mediation, and preparing the settlement agreement and the instant motion. (Bluer Decl., ¶¶ 9-10.) Plaintiff's counsel has extensive experience with this type of litigation. (Bluer Decl., ¶ 11.) There are no objectors, but as noted above, there is also no evidence Plaintiffs gave notice of settlement to the LWDA as required under Labor Code section 2699, subdivision (l)(2). It is thus unclear if the LWDA or some other interested party might have an objection to this proposed settlement.

Plaintiffs’ briefing allows this Court to adequately determine whether the investigation and discovery by Plaintiffs supports the settlement. Plaintiffs seek civil penalties for seven different violations of the Labor Code. Plaintiffs considered that several of the alleged PAGA violations were one-time penalties, such as claims for sick leave retaliation, whistle-blower retaliation, and waiting time penalties. These claims were given less weight. Further, Plaintiffs considered that the evidence reviewed did not sufficiently show the willful intent necessary to prevail on these claims. Plaintiffs indicate that continued litigation might have been cost prohibitive considering the small number of aggrieved employees and pay periods and issues with some of Plaintiffs’ claims, and that Defendants dispute many of the alleged violations. (Motion, 4:24-6:2.) Though Plaintiffs believe they had a reasonable chance of prevailing on these claims, substantial costs and legal fees would have been incurred. Rather than increasing the total net amount of civil penalties (i.e., after fees and costs), the anticipated expenses could have rendered the litigation impractical by causing the legal fees and costs to “eat into” a future settlement of the civil penalties.

Accordingly, the Court finds that the civil penalties agreed upon are fair and reasonable.

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).) In reviewing 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, Plaintiffs’ lodestar is based on the billing rate of Plaintiffs’ counsel. (Bluer Decl., ¶ 11.) Thus, the Court finds the skill and experience of Plaintiffs’ counsel has already been accounted for by the lodestar. The Court further finds that the Plaintiffs’ counsel seeking a percentage (33%), after deduction for litigation costs, instead of the lodestar amount is proper considering the proposed settlement amount of $20,000.00, which would otherwise be eaten up by Plaintiffs’ counsel’s lodestar amount of approximately $18,000.00, i.e., 40 hours x $450.00. (Bluer Decl., ¶¶ 10-11.)

As for costs, Plaintiffs provided an itemization of the costs incurred in this case, namely $135.00 in costs incurred through submitting the online PAGA claim notice ($75.00) and the filing fee for this motion ($60.00), plus $1,500.00 to compensate the settlement administrator. (Bluer Decl., ¶¶ 12-13; Id., Ex. C, § 4.02, subd. (f).) The Court notes however, that Plaintiffs have not identified who the settlement administrator is, nor does the settlement agreement identify who it is, so the Court is unable to determine whether that is a reasonable fee to incur here. (See Bluer Decl., ¶¶ 12-13; Id., Ex. C, § 4.02, subd. (f).)

Accordingly, the Court does not find the award of attorney fees and costs in the settlement agreement to be fair and reasonable.

Plaintiffs separately settled this matter and are not seeking a service award. (See Motion, p. 2, fn. 1.)

The proposed settlement mentions a settlement administrator but does not identify who that is. (See Bluer Decl., Ex. C, § 4.02, subds. (f), (h)-(l); Id., § 4.03.) Plaintiffs do not provide any declarations or evidence from the proposed settlement administrator either. While the Court finds the proposed amount of $1,500.00 to otherwise be fair and reasonable in light of the total settlement amount, the Court is unable to assess the qualifications of the proposed settlement administrator and otherwise determine the propriety of appointing the proposed settlement administrator for that fee.

Accordingly, the Court declines to appoint a settlement administrator at this time.

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

[1] The Court notes that a new version of Labor Code section 2699 went into effect on July 1, 2024, i.e., after Plaintiffs filed this motion, but it does not apply retroactively. (Lab. Code, § 2699, subd. (v)(1), eff. July 1, 2024.) Accordingly, any references to the Labor Code herein refer to the version in effect when Plaintiffs filed this action.