Judge: Malcolm Mackey, Case: 21STCV06572, Date: 2023-07-24 Tentative Ruling

Case Number: 21STCV06572    Hearing Date: July 24, 2023    Dept: 55

HERNANDEZ v. QUADRTECH CORPORATION        21STCV06572

Hearing Date:  7/24/23,  Dept. 55

#8:    MOTION FOR PRELIMINARY APPROVAL OF CLASS ACTION AND PAGA SETTLEMENT.

 

Notice:  Okay

No Opposition

 

MP:  Plaintiff

RP:  

 

Summary

 

On 2/18/21, Plaintiff DELMY PORTILLO DE HERNANDEZ filed a Complaint alleging that, in response to Plaintiff’s complaints about various wage-and-hour violations in employment, Defendant retaliated against Plaintiff, and terminated the employment in approximately March of 2020.

The causes of action are:

(1) WRONGFUL TERMINATION

(2) RETALIATION (CALIFORNIA LABOR CODE § 98.6 AND 1102.5)

(3) VIOLATION OF CALIFORNIA LABOR CODE §§ 510 AND 1198 (UNPAID OVERTIME)

(4) VIOLATION OF CALIFORNIA LABOR CODE §§ 1194, 1197 AND 1197.1 (UNPAID MINIMUM WAGES)

(5) VIOLATION OF CALIFORNIA LABOR CODE § 226.7 (UNPAID REST PERIOD PREMIUMS)

(6) VIOLATION OF CALIFORNIA LABOR CODE §§ 226.7 AND 512(a) (UNPAID MEAL PERIOD PREMIUMS)

(7) VIOLATION OF CALIFORNIA LABOR CODE § 226(a) (FAILURE TO PROVIDE ACCURATE WAGE STATEMENTS)

(8) VIOLATION OF CALIFORNIA LABOR CODE §§ 201, 202 AND 203 (FINAL WAGES NOT TIMELY PAID)

(9) FAILURE TO PROVIDE PERSONNEL RECORDS

(10) VIOLATION OF CALIFORNIA BUSINESS AND PROFESSIONS CODE § 17200, ET SEQ.

(11) PRIVATE ATTORNEY GENERAL ACT, LABOR CODE §2698 ET SEQ.

 

 

MP Positions

 

Moving party requests an order granting preliminary approval of a class action and PAGA settlement, on bases including the following:

The Settlement terms are outlined as follows:

• Size of the Class: approximately 324 individuals.

• Number of Aggrieved Employees: approximately 315 individuals.

• Gross Settlement Amount: $490,000, exclusive of employer-side payroll taxes.

• Settlement Administration Costs: not to exceed $8,250.

• Requested Class Representative Service Payment: $7,500 and Requested General Release

Payment: $10,000 to Plaintiff Portillo de Hernandez.

• PAGA Penalties: $50,000, 75% ($37,500) of which will be paid to the California Labor and Workforce Development Agency (“LWDA”) with the remaining 25% ($12,500) distributed to Aggrieved Employees.

• Requested Class Counsel’s fees and costs: $163,333.33 plus actual litigation costs and expenses not to exceed $15,000.

• Net Settlement Amount: approximately $235,916.67 to be distributed to Participating Class Members.

• Average estimated settlement payment to Participating Class Members: $728.13.

• Average estimated settlement payment to Aggrieved Employees: $39.68.

 

(Motion, p. 1.)

 

 

Tentative Ruling

 

The motion is granted, as prayed.

The Court finds that the subject PAGA settlement is fair, adequate, and reasonable, meaningful and consistent with the purposes of PAGA, as to all subject, affected employees, including because class counsel contemplated the risks of proceeding with the PAGA action and the potential liability of Defendant.  Further, the Court finds that the moving documents provide sufficient information about the nature and magnitude of the claims, amounts in controversy, the realistic range of outcomes of litigation, and the bases for settlement amounts, to enable the Court to intelligently ascertain that the proposed compromise is fair, adequate, and reasonable as to the class members. 

Additionally, the Court finds that the proposed notices to class members are clearly organized, uncomplicated and clear, and sufficiently contain explanations of the settlement, procedures for class members to object at a specified hearing, and information about the effects of settling, in order to enable them to decide whether to accept the benefits, to opt out, to do nothing, or to pursue claims individually. 

 

Judges are to apply an appropriate standard of review of PAGA case settlements, by inquiring whether settlements are “ ‘fair, adequate, and reasonable’ ” and “meaningful and consistent with the purposes of PAGA….”  Moniz v. Adecco USA, Inc. (2021) 72 Cal. App. 5th 56, 64.

“If parties in a PAGA lawsuit agree to settle, the ‘proposed settlement shall be submitted to the [LWDA],’ and the ‘court shall review and approve [the] settlement.’ ” (§ 2699, subd. (l)(2).) Although our Supreme Court has stated that this provision ensures that ‘any negotiated resolution is fair to those affected’…, California courts have not determined the standards by which a trial court reviews and approves a proposed settlement.”  Starks v. Vortex Indus., Inc. (2020) 53 Cal.App.5th 1113, 1124.  Accord  Williams v. Sup. Ct. (2017) 3 Cal. 5th 531, 549  (“PAGA settlements are subject to trial court review and approval, ensuring that any negotiated resolution is fair to those affected.”).

In that regard, settling parties commonly advocate grafting class-action rules onto the legislative procedure, which is somewhat analogous.  Fundamentally, a PAGA representative action not a class action, because there is no collection of individual claims in a PAGA action, but instead a representative action on behalf of the state.  Kim v. Reins Int'l California, Inc. (2020) 9 Cal. 5th 73, 87.

Below is an outline of applicable class-action law.

 

A.  Procedure

 

“A settlement or compromise of an entire class action, or of a cause of action in a class action, or as to a party, requires the approval of the court after hearing.”  CRC Rule 3.769(a).  See also generally  Cal. Practice Guide:  Civ. Pro. Before Trial (The Rutter Group 2023) § 14:138.20 et seq.

 

The settlement agreement and proposed notice to class members must be filed with the motion, and the proposed order must be lodged with the motion. Id.

 

B.  Factors Re Settlement Approval

 

A settlement of a class action requires the approval of the court after hearing. CRC, Rule 1859(a).

 

As to whether the settlement is fair, adequate and reasonable to the class, factors to consider include: 

            •           The strength of plaintiffs’ case

            •           The risk, expense, complexity and likely duration of further litigation

            •           The risk of maintaining class action status through trial

            •           The amount offered in settlement

            •           The extent of discovery completed and the stage of the proceedings

            •           The experience and views of counsel

            •           The presence of a governmental participant

            •           The reaction of class members to the proposed settlement

 

Civ. Pro. Before Trial, supra, at §14:139.13;  Wershba v. Apple Computer, Inc. (2001) 91 Cal.App.4th 224, 244-45. 

 

Courts also decide whether the agreement is a product of fraud or overreaching by, or collusion between, the negotiating parties.  Further, the Court’s responsibility is to “prevent fraud, collusion or unfairness to the class” that may be caused by settlement or dismissal of a class action by the negotiators.  Consumer Advocacy Group, Inc. v. Kintetsu Ent. Of Amer. (2006) 141 Cal.App.4th 46, 60.

 

Class settlements are presumed fair 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.’"  Chavez v. Netflix (2008) 162 Cal.App.4th 43, 52.

Class settlements have been found to be fair and reasonable even where there would be less than one hundred percent recovery, and the amount of relief is “‘relatively paltry.’” Wershba v. Apple Computer (2001) 91 Cal. App. 4th 224, 250.

 

“[T]he merits of the underlying class claims are not a basis for upsetting the settlement of a class action....”  7-Eleven Owners for Fair Franchising v. The Southland Corp. (2000) 85 Cal.App.4th 1135, 1150.

 

It is appropriate for the trial court to utilize a different standard to determine the propriety of a settlement class as opposed to a litigation class certification.  Specifically, a lesser standard of scrutiny is used for settlement cases.  Dunk v. Ford Motor Co. (1996) 48 Cal.App.4th 1794, 1807 fn. 19.

 

" 'The trial court has broad discretion to determine whether the settlement is fair.' "  Cellphone Termination Fee Cases (2009) 180 Cal. App. 4th 1110, 1117.  “‘To merit reversal, both an abuse of discretion by the trial court must be ‘clear’ and the demonstration of it on appeal ‘strong.’”’  Cho v. Seagate Technology Holdings, Inc. (2009) 177 Cal.App.4th 734, 743.

 

The trial court’s duty is to have sufficient information to determine if the settlement is fair, adequate, and reasonable, as to the absent class members.  7-Eleven Owners for Fair Franchising v. The Southland Corp. (Watson) (2000) 85 Cal.App.4th 1135, 1151.  Before approving a class-action settlement, courts must be “provided with basic information about the nature and magnitude of the claims in question and the basis for concluding that the consideration being paid for the release of those claims represents a reasonable compromise.”  Kullar v. Foot Locker Retail, Inc. (2008) 168 Cal.App.4th 116, 133.  A motion for approval of a class-action settlement need not “contain evidence in the form of an explicit statement of the maximum amount the plaintiff class could recover if it prevailed on all its claims…” but must include a record allowing “‘an understanding of the amount that is in controversy and the realistic range of outcomes of the litigation.’” Munoz v. BCI Coca-Cola Bottling Co. of Los Angeles (2010) 186 Cal.App.4th 399, 409.  A trial court abused its discretion in approving a class-action settlement based upon counsel's mere conclusion of the potential value of the claims, without any substantiated explanation or sufficient basis to determine that the settlement value was within the “ballpark” of reasonableness.  Clark v. American Residential Services LLC (2009) 175 Cal. App. 4th 785, 803-04.

 

"[I]n the absence of a reversion provision in the settlement agreement, [CCP] section 384 has eliminated the prospect of reversion of unpaid residue to a defendant, in that it requires payment of such residue to nonprofit organizations."  Cundiff v. Verizon California, Inc. (2008) 167 Cal. App. 4th 718, 728-29.

 

C.  Notice

 

Where the court has certified the action as a class action, notice of the final approval hearing must be given to the class members in the manner specified by the court.  Generally, the form of notice and method of notification are within the court’s discretion.  Civ. Pro. Before Trial, supra, at §14:139.11. 

 

The California Rules of Court leave substantial room for creativity in designing the means of notifying class members.    Hypertouch, Inc. v. Sup. Ct. (2005) 128 Cal. App. 4th 1527, 1551.  “‘[N]o single set of rules or factors has yet emerged, and courts continue to revisit and refine the illusive issue of reasonable notice.’”  Ibid. at 1549 (quoting 2 Newberg on Class Actions (3d ed. 1992) §8.03).

 

Trial courts have discretion as to the manner and content of notice to class members, including how to address subjects required by Civil Code Section 1781 and California Rules of Court, Rule 3.766.  Chavez v. Netflix (2008) 162 Cal.App.4th 43, 57.

 

California Rules of Court, Rule 3.766 sets forth lists of elements required with regard to providing notice to class members.

 

“The notice must contain an explanation of the proposed settlement and procedures for class members to follow in filing written objections to it and in arranging to appear at the settlement hearing and state any objections to the proposed settlement.” CRC Rule 3.769(f).  Also, “[i]f the court grants preliminary approval, its order must include the time, date, and place of the final approval hearing;  the notice to be given to the class; and any other matters deemed necessary….”  CRC Rule 3.769(e).

 

Notices of settlement to class members must provide adequate information about the effects of settling to allow them to decide whether to accept the benefit, or to opt out, and the available avenues for pursuing an individual claim.  Chavez v. Netflix (2008) 162 Cal.App.4th 43, 56.

 

“Ordinarily it is the plaintiff's responsibility to provide notice and bear the expense of doing so ..., but there are circumstances in which courts have required the defendant to assist in identifying class members and/or to bear or share the expense of providing them notice.”   Hypertouch, Inc. v. Sup. Ct. (2005) 128 Cal. App. 4th 1527, 1551.

 

“The purpose of the class notice in the context of a settlement is to give class members sufficient information to decide whether they should accept the benefits offered, opt out and pursue their own remedies, or object to the settlement.  [Citation omitted.]  As a general rule, class notice must strike a balance between thoroughness and the need to avoid unduly complicating the content of the notice and confusing class members.  Here again the trial court has broad discretion.  [Citation omitted.]”  Wershba, supra, at 252.

 

  A notice of settlement was sufficient, even without a calculation of the monetary amount each class member could receive, where there was no indicator that it related to fairness of the class-action settlement.  See  Munoz v. BCI Coca-Cola Bottling Co. of Los Angeles (2010) 186 Cal.App.4th 399, 409-12.

 

 

D.  Class Certification

 

As to class settlement matters, there is a relaxed standard for class certification, because case-management and trial issues are not concerns.  Dunk v. Ford Motor Co. (1996) 48 Cal.App.4th 1794, 1807 n.  19;  Global Minerals & Metals Corp. v. Sup. Ct. (2003) 113 Cal.App.4th 836, 859.

 

Generally, “[t]he party seeking certification has the burden to establish the existence of both an ascertainable class and a well-defined community of interest among class members. …. The ‘community of interest’ requirement embodies three factors: (1) predominant common questions of law or fact; (2) class representatives with claims or defenses typical of the class; and (3) class representatives who can adequately represent the class….”  Sav-on Drug Stores, Inc. v. Sup. Ct.  (2004) 34 Cal.4th 319, 326.  Accord  Fireside Bank v. Sup. Ct. (2007) 40 Cal.4th 1069, 1089;  Washington Mutual Bank, FA v. Sup. Ct.  (2001) 24 Cal.4th 906, 913.

 

            E.  Releases

 

“A general release—covering ‘all claims’ that were or could have been raised in the suit—is not uncommon in class action settlements.”  Villacres v. ABM Industries Inc. (2010) 189 Cal.App.4th 562, 588.

 

Broad and general settlement releases including claims that fall outside the scope of the operative complaint should be closely scrutinized and avoided.  Trotsky v. Los Angeles Fed. Sav. & Loan Assn. (1975) 48 Cal.App.3d 134, 148.

 

F.  Attorneys’ Fees

 

“Any agreement, express or implied, that has been entered into with respect to the payment of attorney fees or the submission of an application for the approval of attorney fees must be set forth in full in any application for approval of the dismissal or settlement of an action that has been certified as a class action.”  CRC Rule 3.769(b).  Generally, only a minimal record is required for awarding the attorney fees.  Civ. Pro. Before Trial, supra, at §14:146.

 

Procedurally, an attorney fee award is handled at the fairness hearing.  PLCM Group, Inc. v. Drexler (2000) 22 Cal.4th 1084, 1095-96.

 

One test is whether class counsel are placed in a position that might endanger the fair representation of the clients and whether they will be compensated on some basis other than legal services.  Rebney v. Wells Fargo Bank (1991) 232 Cal. App. 3d 1344, 1347.

 

Alternative discretionary approaches are the common fund theory, and the "lodestar" method, by which the court calculates base amounts from a compilation of time spent and reasonable hourly compensation of each attorney and then adjusts the base amounts.  Id.; Civ. Pro. Before Trial, supra, at 14:145 et seq.   The primary method for establishing the amount of "reasonable" attorney fees is the lodestar method. Thayer v. Wells Fargo Bank (2001) 92 Cal. App. 4th 819, 833.   “[T]he fee setting inquiry in California ordinarily begins with the "lodestar," i.e., the number of hours reasonably expended multiplied by the reasonable hourly rate. "California courts have consistently held that a computation of time spent on a case and the reasonable value of that time is fundamental to a determination of an appropriate attorneys' fee award…”  PLCM Group, Inc. v. Drexler (2000) 22 Cal.4th 1084, 1095.       “The trial judge has discretion  to determine the value of professional services, based upon a proper utilization of the lodestar adjustment method.  Ramos v. Countrywide Home Loans, Inc. (2000) 82 Cal.App.4th 615, 626.   “[W]hen a number of persons are entitled in common to a specific fund, and an action brought by a plaintiff or plaintiffs for the benefit of all results in the creation or preservation of that fund, such plaintiff or plaintiffs may be awarded attorney's fees out of the fund.” Serrano v. Priest (1977) 20 Cal.3d 25, 34.   “In referring to "reasonable" compensation, we indicated that trial courts must carefully review attorney documentation of hours expended; "padding" in the form of inefficient or duplicative efforts is not subject to compensation…..Under Serrano III, the lodestar is the basic fee for comparable legal services in the community; it may be adjusted by the court based on factors including, as relevant herein, (1) the novelty and difficulty of the questions involved, (2) the skill displayed in presenting them, (3) the extent to which the nature of the litigation precluded other employment by the attorneys, (4) the contingent nature of the fee award. (Citation omitted) The purpose of such adjustment is to fix a fee at the fair market value for the particular action.”    Ketchum III v. Moses (2000) 24 Cal.4th 1122, 1132.

 

Attorney fees determined under either the lodestar method, or the common fund doctrine, must be a reasonable fee to compensate attorneys for their efforts, and percentage figures must accurately reflect the marketplace.  Consumer Privacy Cases (2009) 175 Cal. App. 4th 545, 558.  While fee awards of 25 percent of a fund are regarded as the “benchmark” award that should be given, also awards of one-third have been regarded as being within a reasonable range.  Ibid.

 

            G. Enhancement Fees

 

An award of a service fee to class representatives has been upheld, where the evidence supports a finding that the proposed service payment to Plaintiff is fair and reasonable.  E.g., Civ. Pro. Before Trial, supra, at §14:146.10 (citing Bell v. Farmers Ins. Exch. (2004) 115 Cal.App.4th 715, 726).  

 

“[S]pecificity, in the form of quantification of time and effort expended on the litigation, and in the form of reasoned explanation of financial or other risks incurred by the named plaintiffs, is required in order for the trial court to conclude that an enhancement was ‘necessary to induce [the named plaintiff] to participate in the suit ….’ ”  Clark v. Amer. Residential Services LLC (2009) 175 Cal. App. 4th 785, 807.

 

            H.  Order

 

A proposed order must be lodged.  CRC Rule 3.769(c).

 

I.  Scheduling

 

Below is a list of items that might be scheduled, if the motion is granted:

 

1. Plaintiffs’ submission of revised form of Notice to Court, if ordered.                             

 

2. Defendant’s mailing list to plaintiff’s counsel, in mailing label format.

 

3. First mailing of notice to the class.

           

4.  Follow-up mailing of notice where first mailing is returned.

 

5. Deadline for opt-outs and objections.                                                                                                   

 

6.  Any supplemental briefs regarding proof of mailing, opt-outs, objections, and request for attorneys’ fees.

 

7. Fairness hearing & award of attorneys’ fees.

 

8.  Claims administration:

 

(a)        Deadline for class to submit proof of claims.

(b)        Report on residual to be filed.

(c)        Hearing re: disposition of residual.

 

See generally  CRC Rule 3.769(e);  Civ. Pro. Before Trial, supra, at §§14:139.10, 14:147 et seq.