Judge: Mel Red Recana, Case: 20STCV34717, Date: 2024-03-06 Tentative Ruling
All rulings shown here are TENTATIVE ONLY, and thus oral argument WILL be heard. All Counsel are still required to attend.
Case Number: 20STCV34717 Hearing Date: March 6, 2024 Dept: 45
Hearing date: March
6, 2024
Moving Party: Nonparty
Rosalina Estrada de Teque
Responding
Party: Defendants R. J. ACQUISITION CORP. dba. ADART COMPANY and JOSEPH M.
DEMARCO, joined by Plaintiff Yanluy Santos
Motion
to Set Aside and Vacate Judgment
The Court
considered the moving papers, opposition, and reply.
The
motion is denied.
Background
On January 7,
2020, Plaintiff Yanluy Santos (“Santos”) filed a notice under the Private Attorneys General Act of 2004 (“PAGA”). It
included as claims: (1) failure to pay overtime wages; (2) failure to pay
minimum wages; (3) failure to provide meal periods; (4) failure to provide rest
periods; (5) failure to timely pay wages before separation of employment; and
(6) failure to provide accurate itemized wage statements (“Standard Wage
Violations”). On September 10, 2020, Santos filed the instant action against Defendants
R. J. Acquisition Corp. dba. Adart Company (“AdArt”) and Joseph M. Demarco
(“Defendants”) seeking civil penalties under PAGA for the Standard Wage
Violations (the “Santos Action”).
On or about
March 19, 2021, Rosalina Estrada de Teque (“Teque”) filed a civil complaint
against Defendants, initiating case no. 21STCV11233 (the “Teque
Action”). At the same time, Teque filed a PAGA notice indicating that she
planned to bring action for civil penalties not only for the Standard Wage
Claims that Santos had already asserted, but also claims under the other Labor
Code sections regarding reimbursement for necessary business expenses and
deposits, payment of vacation time owed upon separation, and the employer’s
duty to maintain adequate and accurate employee records for review. (“Unique
PAGA Claims”). (See Declaration of Henry Glitz [“Glitz Decl.”], ¶¶ 4-5
Ex. A.)
On August 18,
2021, Defendants filed a Notice of Related Case seeking to relate the Teque
and Santos Actions. (See Glitz Decl., ¶¶ 8-9 Ex. C.) The Teque
Court ruled on August 26, 2021, that the two cases were not related. (See id.,
¶¶ 10-11 Ex. D.)
On September 22,
2022, Santos and Defendants attended a mediation. (Harris Decl., ¶3 and Ex. 2.)
Santos and Defendants eventually agreed to a mediator’s proposal, with the
terms of the settlement reduced to a writing that was fully executed on
November 11, 2022 (the “Santos Settlement”). (Harris Decl., ¶3.)
On February 21,
2023, Santos moved this court for approval of the Santos Settlement. The
settlement agreement submitted for approval provided for the release of all claims
arising between July 20, 2019 and December 31, 2022, in exchange for payment by
Defendants of a gross settlement amount of $50,000. (See Teque Request
for Judicial Notice [“Teque RJN”], Ex. 2 ¶¶ 12, 15.) Santos’ declaration filed
in support of the motion, stated that as a requirement of the settlement,
Santos would file an amended PAGA notice, which was filed on November 21, 2022
(“Amended PAGA Notice”). Teque alleges that Santos’ Amended PAGA Notice was a
word-for-word copy of Teque’s PAGA notice, and now included Teque’s Unique PAGA
Claims. (Compare Glitz Decl., ¶ 5 Ex. A with Teque RJN, Ex. A.)
On April 18,
2023, this Court entered judgment approving the Santos Settlement. (See Teque
RJN, Ex. B.) On or about May 25, 2023, the ILYM Group, Inc., acting as the
court-approved third-party administrator in this matter, mailed PAGA settlement
notices and disbursed all funds to all aggrieved employees (including Teque)
and the State of California. (Id.)
On June 1, 2023,
Defendants’ counsel emailed Teque’s counsel regarding the Santos Settlement,
advising that Teque’s PAGA claims “are now moot in light of the recently
approved settlement in the earlier-filed Santos action against AdArt.” Teque’s
counsel neither acknowledged nor replied to this email. (Bothamley Decl., ¶8
and Ex. F.)
On July 28,
2023, the Teque Court ordered the parties to meet and confer regarding
the impact of the Santos Settlement and Judgment. Over the following two weeks,
the parties discussed the Settlement over phone calls and emails, and submitted
a joint statement to Judge Rice regarding their respective positions. During
these discussions, Teque’s counsel did not raise any of the arguments she now
raises in the instant motion; instead she took the position that while the
Santos Settlement was effective, she nonetheless retained standing to pursue a
PAGA claim for any period after the release approved by the Santos judgement.
(Bothamley Decl., ¶8 and Ex. G (pp. 1-8); Defendants’ Request for Judicial
Notice, Ex. 4.) Defendants have moved the Teque Court for summary
adjudication and are seeking sanctions against Teque for a PAGA cause of action
they claim is now extinguished, including Teque’s Unique PAGA Claims.
On September 11,
2023, Teque was served with the April 18, 2023 order approving the Santos
Settlement. (Bothamley Decl., ¶10, Ex. H.)
On
October 16, 2023, Teque, a nonparty in this action, filed the instant motion to
vacate or set aside judgment approving the Santos Settlement Agreement. Defendants
filed opposition papers on January 17, 2024. Teque replied on January 23, 2024.
Legal
Standard
Code
of Civil Procedure section 473, subd. (b) provides: “The court may, upon any
terms as may be just, relieve a party or his or her legal representative from a
judgment, dismissal, order, or other proceeding taken against him or her
through his or her mistake, inadvertence, surprise, or excusable neglect. Application
for this relief shall be accompanied by a copy of the answer or other pleading
proposed to be filed therein, otherwise the application shall not be granted,
and shall be made within a reasonable time, in no case exceeding six months,
after the judgment, dismissal, order, or proceeding was taken.” (Code Civ.
Proc. § 473, subd. (b).)
A
ruling may also be set aside and vacated on the basis of “[n]ewly discovered
evidence” which “could not, with reasonable diligence, have [been] discovered
and produced at the trial.” (Code Civ. Proc. § 657(4).)
Code of Civil
Procedure section 663 provides that any “judgment or decree” may be vacated
upon a showing of an “[i]ncorrect or erroneous legal basis for the decision,
not consistent with or supported by the facts[.]” (Code Civ. Proc. § 663, subd.
(1).)
Requests
for Judicial Notice
Both parties’ requests for judicial
notice are granted. Teque’s objection to judicial notice of the Joint Report
Re: July 28, 2023 Status Conference filed in the Teque action is
overruled.
Evidentiary
Objections (if applicable)
Teque’s
evidentiary objections to the Bothamley Declaration are overruled.
Discussion
Procedural
requirements
Teque’s motion
is made pursuant to CCP §§ 473, 657 and 663. Defendants argue that Teque’s
motion is procedurally improper for several reasons.
First,
Defendants argue that all three statutes provide relief only to a party in an
action. As a nonparty, Teque therefore has no ability to interfere without
first intervening and becoming a party. However, Teque may no longer intervene
because a final judgment has been entered. Teque provides contrary authority,
citing Hernandez v. Restoration Hardware, Inc. (2018) 4 Cal.5th 260, 267
(“an unnamed party to the action may also become a named party by filing an
appealable motion to set aside and vacate the class judgment.”); In
re Elliott (1904) 144 Cal. 501, 509 (holding that
non-party “may make himself a party by moving to set aside such judgment or
order, and, if his motion is denied, may, on appeal from that order, have the
proceeding of which he complains reviewed . . . for error”); and In re
Marriage of Burwell (2013) 221 Cal.App.4th 1, 13-14 (the filing of “any
motion to vacate or set aside an order … will confer ‘party’ status on the
movant”). In this class action context, Teque may intervene even though she is
not a named party and a final judgment has been entered.
Second,
Defendants argue that Teque’s motion is untimely. Specifically, under section
663, a motion for relief from judgment must be filed within 15 days of service
of a notice of entry of judgment. Here, Defendants argue that Teque was served
the April 18 Order approving the Settlement on September 11, and Teque filed
this motion 36 days later. Teque argues that Defendants intentionally concealed
the fact that Teque’s overlapping claims were also settled in the Santos Settlement.
Notably, when Defendants filed their notice of related case in the Teque
action, Santos’ original PAGA notice and complaint did not yet include the
overlapping claims, which were only later added in Santos’ Amended PAGA Notice.
Moreover, because the Teque court deemed the two cases unrelated, Teque
had no reason to believe at the time that there was any chance of overlap
between the claims in the two actions. To this point, Defendants argue that the
Amended PAGA Notice was filed as a public document on February 21, 2023, and
therefore would have been discovered with reasonable diligence. (Opp’n,
12:1-11.) Moreover, Defendants’ counsel attested that they gave Teque notice of
the settlement as early as June 1, 2023, when Defendants’ counsel emailed
Teque’s counsel about the Settlement. (Bothamley Decl., ¶8 and Ex. F.) In any
case, Teque must have found out about the contents of the settlement at least
as early as July 28, 2023 or shortly thereafter, when the Teque court ordered
the parties to meet and confer about the impact of the Santos settlement on the
Teque Action. Accordingly, Teque’s motion, filed in October 2023, is
untimely under section 663, and Teque may not rely on it to set aside or vacate
the Santos judgment. For the same reason, Teque’s motion cannot be made under
section 657(4) because it is not supported by newly discovered evidence that
could not have been discovered earlier.
Third,
Defendants argue that Teque’s motion fails to meet section 473’s requirement
that an application for relief under that section be accompanied by a copy of
the answer or other pleading proposed to be filed therein. Defendants argue
that Teque should have concurrently filed a petition for leave to intervene and
a proposed complaint or answer. Section 473 is the only remaining possible
basis for the motion. However, Teque does not address this argument.
Notice of the Santos Settlement to Teque
Teque’s motion is based on three
distinct grounds. The first one is that the parties to
the Santos Action failed to provide any notice whatsoever to Teque of
the settlement of representative claims she is concurrently pursuing in her own
pending suit under PAGA. Teque concedes that no published case authority has
found that plaintiffs with already-filed PAGA representative claims are
entitled to notice of settlement of overlapping claims. Instead, Teque seeks a
decision that would further the policy behind PAGA, namely, to protect
employees. (See Reply, 6:9-23.)
However, as
discussed above, Teque did receive notice. She had constructive notice when
Santos’ amended PAGA notice was filed as a public document two months before
this Court approved the settlement. Teque then received actual notice sometime
between June 1, when Defendants’ counsel emailed Teque’s counsel about the
settlement, and July 28 or soon thereafter, when the Teque court ordered the
parties to meet and confer about the meaning of the Santos settlement on the
Teque action.
Teque argues in
the alternative that she should be entitled to relief from her counsel’s
mistake or excusable neglect in failing to earlier move to intervene in the
Santos settlement process. However, she makes this argument based on CCP
Section 473, but does not attached a copy of the answer or other pleading
proposed to be filed, as required by the Code.
Collusive
Reverse Auction in the Settlement Process
Teque’s second
ground for the motion is that the Santos Action settlement must be set aside
and vacated because it is the product of a collusive “reverse auction” whereby
a defendant “buys” a release of claims against it from the lowest-bidding plaintiff’s
counsel. Teque provides circumstantial evidence that the settlement may not
have been fair, adequate and reasonable. Teque points out, for instance, that Santos’
Amended PAGA Notice was filed shortly after attending mediation with
Defendants, adding allegations of Labor Code violations “completely unrelated”
to those listed in Santos’ original Notice. (Motion, 12:23-26.) Moreover, a
comparison of Santos’
Amended PAGA Notice with Teque’s own
prior-filed notice reveals that the two are word-for-word identical, suggesting
that the former was copied from the latter. (See Glitz Decl., ¶ 5, Ex.
A.) Language from the Santos Parties’ shows that Santos’ Amended Notice was
filed at Defendants’ request, not because of any new information uncovered by Santos
in the course of investigating such claims. (See Teque RJN, Ex. A ¶ 2,
Ex. 2 ¶ 13.) Teque also points to the dearth of evidence on the record that
could provide an alternate, legitimate explanation for his sudden attempt to
include the new claims included in his amended PAGA notice.
Defendants
provide circumstantial evidence of a fair, adequate and reasonable settlement.
For instance, Santos’ attorney, Stephen Harris, was also communicating directly
with the Labor Commissioner’s Office’s attorney Michael Smith, who prosecutes
claims against employers on behalf the Labor and Workforce Development Agency
(“LWDA”). (Bothamley Decl., ¶5 and Ex. C.) The LWDA
opined to Harris that Santos had greater bargaining power than Teque given that
Santos never signed an arbitration agreement that contained a class-action
waiver, like Teque did. (Id.) The Labor Commissioner’s Office had
undertaken an investigation (with Attorney Smith overseeing the investigation)
covering nearly 4 years of Defendants’ practices concerning its salaried and
hourly employees, and had completed a 10-day administrative evidentiary hearing
(chaired by Attorney Smith) prosecuting Labor Code violations against
Defendants relating to salaried and hourly employees of Defendants. Prior to
mediation, Santos’ counsel obtained transcripts of testimony in connection with
that administrative hearing to provide context and insight into the risks and
merits of pursuing PAGA litigation against Defendants. (Harris Decl., ¶16; Ex. 4.)
Santos’ Standing
to Settle Claims on Behalf of the LWDA
Finally, as a
third discrete basis for the Motion, Teque argues that Santos did not have
standing to settle the claims added in his Amended Notice because Santos did
not exhaust administrative remedies for those claims prior to bringing suit, as
required by PAGA. To support this point, Teque argues that PAGA contains a
one-year statute of limitations for a plaintiff to give notice to the LWDA of
alleged Labor Code violations. Here, Santos’ employment ended much longer than
one year before his Amended Notice, and the amended claims do not relate back
to the claims in his original notice. In Opposition, Defendants argue that
Defendants simply waived the statute of limitations defense. “[A]
defendant may waive the statute of limitations defense and agree to pay
penalties or a period of time greater than the statute of limitations would
otherwise allow.” (Amaro v. Anaheim Arena Management, LLC (2021) 69
Cal.App.5th 521, 541-542; see also Huff v. Securitas Security Services USA,
Inc. (2018) 23 Cal.App.5th 745, holding that PAGA plaintiffs may sue on
behalf of all other employees who have suffered violations of the Labor Code
even if the PAGA plaintiff did not suffer those violations.)
In conclusion,
although Teque raises some legitimate questions of notice and fairness to
unnamed parties in the context of PAGA class action settlements, Teque’s motion
is made on dubious procedural grounds, none of which the Court may properly
rely on to grant relief. Accordingly, the motion to set aside or vacate judgment
is denied.
It
is so ordered.
Dated: March 6, 2024
_______________________
ROLF
M. TREU
Assistant
Judge of the Superior Court