Judge: Mel Red Recana, Case: 23STCV19730, Date: 2024-11-19 Tentative Ruling
Case Number: 23STCV19730 Hearing Date: November 19, 2024 Dept: 45
Hearing date: November 19, 2024
Moving Party: Plaintiff
Alexander Montoya
Responding
Party: None
Motion
for Preliminary Approval of Class and Representative Action Settlement
The
Court considered the moving papers.
The
Court GRANTS the unopposed Motion for Preliminary Approval of Class and
Representative Action Settlement filed by Plaintiff Alexander Montoya on September
18, 2024. Prior to the final fairness
hearing, Plaintiff should submit proof
that the proposed settlement agreement was submitted to the LWDA as Exhibit E
to the Declaration of Roman Otkupman only shows that counsel initiated a filing
of the proposed settlement agreement with the LWDA. There is no confirmation that the LWDA
received the proposed settlement agreement.
Background
On August 17, 2023, plaintiff Alexander Montoya, on
behalf of the general public and other “aggrieved employees” (“Plaintiff”)
filed a representative action complaint against defendants MNE Conglomerate,
Inc., ENW Trucking, LLC, and Does 1 through 10 (collectively “Defendants”).
On March 5, 2024, Plaintiff filed a First Amended class
and representative action complaint against Defendants for (1) knowing and
intentional failure to comply with itemized employee wage statement provisions
(Labor Code § 226(a), (e), 1174(d)); (2) failure to timely pay wages due at
termination (Labor Code §§ 201-203); (3) failure to timely pay employees in
violation of Labor Code § 204(a)(b); (4) failure to reimburse for business
expenses in violation of Labor Code § 2802; (5) violation of Business and Professions
Code § 17200; and (6) penalties pursuant to Labor Code § 2699(f) for violations
of Labor Code §§ 226(a),(e) 1174(d), 201- 203, 204(a)(b), 2802.
The operative complaint alleges the following. Plaintiff
was employed by Defendants as a non-exempt, hourly employee in California,
including in and around the city of Wilmington, County of Los Angeles. During
Plaintiff’s employment: (1) Plaintiff did not receive final wages upon
termination; (2) Plaintiff and the Class were not paid in a timely manner
pertaining to the waiting time penalties in accordance with Labor Code §§
201-203; (3) Plaintiff was forced to receive inaccurately itemized and
deficient wage statements, in violation of Labor Code § 226(a); (4) Plaintiff
did not receive his compensation in accordance with Labor Code Section 204 in
that Defendant failed to issues wages to its employees within seven (7)
calendar days after the pay period ended; and (5) Defendant also failed to
reimburse Plaintiff and Defendant’s California employees for reasonable and
necessary expenses in the course of their job duties, in violation of Labor
Code § 2802.
On June 26, 2024, the parties participated in a Mandatory
Settlement Conference with Joshua Boxer of Resolve Law LA, which resulted in
the proposed settlement as outlined in the Class Action and PAGA Settlement
Agreement (the “Settlement Agreement”) attached to the Declaration of Roman
Otkupman as Exhibit B.
Now before the Court is Plaintiff’s Motion for Preliminary
Approval of the Settlement filed on September 18, 2024. Defendants filed notice
of non-opposition to Plaintiff’s Motion on November 4, 2024.
Legal
Standard
Approval of class action settlements occurs in
two steps. First, the court preliminarily approves the settlement and the class
members are notified as directed by the court. (Cal. Rules of Court, rule
3.769(c), (f); Cellphone Termination Fee Cases (2009) 180 Cal.App.4th
1110, 1118.) Second, the court conducts a final approval hearing to inquire
into the fairness of the proposed settlement. (Cal. Rules of Court, rule
3.769(e); Cellphone Termination Fee Cases, supra, 180 Cal.App.4th at
1118.) “Any party to a settlement agreement may serve and file a written notice
of motion for preliminary approval of the settlement.” (Cal. Rules of Court,
rule 3.769(c).) “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.” (Ibid.)
“‘The trial court has broad discretion to
determine whether the settlement is fair.’” (Cellphone Termination Fee Cases,
supra, 180 Cal.App.4th at 1117 (quoting Dunk v. Ford Motor Co. (1996) 48
Cal.App.4th 1794, 1801).) In determining whether to approve a class settlement,
the court’s responsibility is to “prevent fraud, collusion or unfairness to the
class” through settlement and dismissal of the class action because the rights
of the class members, and even named plaintiffs, “may not have been given due
regard by the negotiating parties.” (Consumer Advocacy Group, Inc. v.
Kintetsu Enterprises of America (2006) 141 Cal.App.4th 46, 60.)
Discussion
1.
The Settlement Class Definitions
“Class”
means all persons employed by Defendants in California and classified as truck
drivers who worked for Defendants during the Class Period. (Settlement
Agreement ¶ 1.5.)
“Class
Period” means the period from March 13, 2020 through March 13, 2024. (Id.
at ¶ 1.12.)
“Aggrieved
Employee” means a person employed by Defendants in California and classified as
a truck driver paid on an hourly basis who worked for Defendants during the
PAGA Period. (Id. at ¶ 1.4.)
“PAGA
Period” means the period from June 13, 2022 to March 13, 2024. (Id. at ¶
1.31.)
“Participating
Class Member” means a Class Member who does not submit a valid and timely
Request for Exclusion from the Settlement. (Id. at ¶ 1.35.)
2.
The Key Settlement Terms
Defendants
shall pay an aggregate sum of $200,000.00 (the “Gross Settlement Amount” or
“GSA”). (Id. at ¶ 1.22.)
The
Net Settlement Amount is the GSA, less the following payments in the amounts
approved by the Court: Individual PAGA Payments ($7,500 (25% of $30,000 PAGA
payment)), the LWDA PAGA Payment ($22,500 (75% of $30,000 PAGA payment)), Class
Representative Service Payment (up to $10,000), Class Counsel Fees Payment
(33.3% or $66,600), Class Counsel Litigation Expenses Payment (up to $15,000),
and the Administration Expenses Payment (up to $10,000). The remainder is to be
paid to Participating Class Members as Individual Class Payments. (Id.
at ¶¶ 1.24, 1.28, 3.1-3.2.)
Employer-side
payroll taxes will also be paid out of the GSA. (Id.
at ¶ 3.1.)
The
Individual Class Payment is calculated by (a) dividing the Net Settlement
Amount by the total number of Workweeks worked by all Participating Class
Members during the Class Period and (b) multiplying the result by each
Participating Class Member’s Workweeks. (Id. at ¶ 3.2.4.) 10% of each Participating Class
Member’s Individual Class Payment will be allocated to settlement of wage
claims, and 90% of each Participating Class Member’s Individual Class Payment
will be allocated to settlement of claims for interest and penalties. (Id.
at ¶ 3.2.4.1.) The
payment for interest and penalties will be issued through a Form 1099 and will
not be subject to tax withholdings or deductions. (Id.)
The
parties have agreed to appoint the neutral entity APEX Class Action to
administer the Settlement. (Id. at
¶ 1.2.)
There
is no claim form requirement. (Otkupman Decl., ¶ 36.)
3.
Notice of the Settlement
Agreement to the LWDA
A proposed PAGA settlement must be submitted to
LWDA at the same time that it is submitted to the court for review and approval.
(Lab. Code, § 2699, subd. (l)(2).)
Here, Plaintiff’s counsel attests that notice
of the Settlement Agreement was provided to the LWDA, and counsel attaches
Exhibit E as proof of that notice. (Otkupman Decl., ¶ 39; Ex. E.) Exhibit E
shows that counsel initiated a filing of the Settlement Agreement to the LWDA,
but Exhibit E does not show that counsel submitted the filing. Therefore, there
is no confirmation that the LWDA received the filing. Counsel should submit confirmation
of the filing, such as a proof of submission email from the LWDA, prior to the
final fairness hearing.
4.
Presumption of Fairness
A presumption of fairness¿for a settlement agreement 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. (Dunk v. Ford Motor Co.¿(1996) 48
Cal.App.4th 1794, 1802.) The final factor does not apply to PAGA. (See Arias
v. Superior Court (2009) 46 Cal.4th 969, 984 [representative actions under
PAGA do not violate the due process rights of “nonparty aggrieved employees who
are not given notice of, and an opportunity to be heard”].)
Here,
the parties engaged in extensive discussions and comprehensive informal
discovery in which Defendants provided Plaintiff with relevant information,
including data pertaining to the class. (Otkupman Decl., ¶¶ 14-15.) Specifically,
Defendants provided documents and data detailing employee information and
workweeks, including the total number class members and aggrieved employees,
and the average rate of pay for class members in each year in question. Based
on the workweeks, pay periods, and class size numbers, Plaintiff analyzed the
number of potential violations and potential penalties for the Class Members
and Aggrieved Employees and created a damage exposure. The data provided by
Defendants was sufficient to calculate the realistic exposure of Defendants’
potential liability. (Id. at ¶ 15.) The parties further participated in
a Mandatory Settlement Conference with Resolve Law LA. (Id. at ¶ 17.)
Plaintiff’s
counsel, Otkupman Law Firm, ALC (“Otkupman Law”), prosecutes wage and hour
cases on behalf of the employees whose rights have been violated. Otkupman Law,
either on its own or with co-counsel is currently serving as Plaintiff’s
counsel of record in dozens of wage and hour and employment class action cases
pending in both state and federal court. (Id. at ¶ 5.) Otkupman Law has
successfully litigated and resolved numerous wage and hour class actions
involving failure to pay wages, wage statement violations and derivative Labor
Code claims and penalties. (Id. at ¶ 6.)
Based on the foregoing, the Court finds the settlement was reached
through arm’s-length bargaining with sufficient investigation to allow counsel
and the Court to act intelligently and that Plaintiff’s counsel is experienced
in similar litigation. Therefore, the settlement is entitled to a
presumption of fairness.
5. PAGA Penalties
A court must review and approve any PAGA
penalties sought as part of a proposed settlement agreement. (Lab. Code § 2699,
subd. (l).) “[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 and 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).)
Here, the PAGA penalties comply with this
requirement. (Settlement Agreement ¶¶ 1.34, 3.2.5.) Accordingly, the PAGA penalties are
appropriate.
6.
Release of Claims
Participating
Class Members will release on behalf of themselves and their respective former
and present representatives, agents, attorneys, heirs, administrators,
successors and assigns, the Released Parties from all claims that were alleged,
or reasonably could have been alleged, based on the Class Period facts stated
in the Operative Complaint and ascertained in the course of the Action
including, any and all claims involving any alleged failure to pay minimum
wage. (Id. at ¶ 5.2.)
Aggrieved
Employees, regardless of whether they opt-out of the Class Settlement, will
release on behalf of themselves and their respective former and present
representatives, agents, attorneys, heirs, administrators, successors and
assigns, the Released Parties from all claims for PAGA penalties that were
alleged, or reasonably could have been alleged, based on the PAGA Period facts
stated in the Operative Complaint, and the PAGA Notice and ascertained in the
course of the Action including, any and all claims involving any alleged
failure to pay minimum wage. (Id. at ¶ 5.3.)
“Released
Parties” means: Defendants and each of its former and present directors,
officers, shareholders, owners, attorneys, insurers, predecessors, successors,
assigns, subsidiaries, and affiliates. (Id. at ¶ 1.41.)
Plaintiff
will also provide a general release and Civil Code section 1542 waiver. (Id.
at ¶ 5.1.)
The
releases are effective when Defendants fully fund the entire GSA. (Id.
at ¶ 5.)
Here, the releases appear permissible as the release by Participating
Class Members is for claims as alleged under the operative complaint, while the
release by Aggrieved Employees is for claims for penalties under PAGA. The
Participating Class Members release does not release any claims for penalties
under PAGA and the Aggrieved Employees release does not release any claims for
underlying wage and hour claims.
7.
Notice
The proposed Class Notice is attached to the Settlement Agreement
as Exhibit A (Declaration of Otkupman as Exhibit C). Its content appears to be
acceptable. It includes information such as: a summary of the litigation; the
nature of the settlement; the terms of the settlement agreement; the proposed
deductions from the gross settlement amount (attorney fees and costs, enhancement
awards, and administration costs); the procedures and deadlines for
participating in, opting out of, or objecting to, the settlement; the
consequences of participating in, opting out of, or objecting to, the settlement;
and the date, time, and place of the final approval hearing. The Class Notice
will be in English with Spanish translation and mailed via first-class USPS. (Id.
at ¶ 7.4.2.)
8.
Administration
Costs
As indicated above, settlement administration costs are estimated
not to exceed $10,000. (Id. at ¶¶ 3.2.3, 7.1.) Prior to the time of the final fairness hearing, the claims
administrator, APEX Class Action, must submit
a declaration attesting to the total costs incurred and anticipated to be
incurred to finalize the settlement for approval by the Court.
9.
Attorney’s
Fees and Litigation Costs
CRC rule 3.769(b) states: “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.”
Ultimately, the award of attorney fees is made
by the court at the fairness hearing, using the lodestar method with a
multiplier, if appropriate. (PLCM Group, Inc. v. Drexler (2000) 22
Cal.4th 1084, 1095-1096; Ramos v. Countrywide Home Loans, Inc. (2000) 82
Cal.App.4th 615, 625-626; Ketchum III v. Moses (2000) 24 Cal.4th 1122,
1132-1136.) Despite any agreement by the parties to the contrary, “the court
ha[s] an independent right and responsibility to review the attorney fee
provision of the settlement agreement and award only so much as it determined reasonable.”
(Garabedian v. Los Angeles Cellular Telephone Company (2004) 118
Cal.App.4th 123, 128.)
The question of whether Otkupman
Law is entitled to $66,600
(33.3%) in attorney’s fees will be addressed at the fairness hearing when class
counsel brings a noticed motion for attorney fees. (Settlement Agreement
¶ 3.2.2.) Class counsel must
provide the court with billing information so that it can properly apply the lodestar
method and must indicate what multiplier (if applicable) is being sought.
Class counsel should also be prepared to
justify the costs sought (up to $15,000) by detailing how they were
incurred. (Ibid.)
10.
Service
Payment
The Settlement Agreement provides for an enhancement award of up
to $10,000 to the named Plaintiff. (Id. at ¶ 3.2.1.)
In connection with the final fairness hearing, named Plaintiff
must submit a declaration attesting to why he or she should be entitled to an
enhancement award in the proposed amount. The named Plaintiff must explain why
he or she “should be compensated for the expense or risk she has incurred in
conferring a benefit on other members of the class.” (Clark v. American
Residential Services LLC (2009) 175 Cal.App.4th 785, 806.) Trial courts
should not sanction enhancement awards of thousands of dollars with “nothing
more than pro forma claims as to ‘countless’ hours expended, ‘potential stigma’
and ‘potential risk.’ Significantly more specificity, 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
plaintiff, 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 . . . .’” (Id. at 806-807, italics and ellipsis in original.)
The Court will decide the issue of the enhancement awards at the time of final
approval.
Conclusion
Based
on the foregoing, the Motion for Preliminary Approval of Class and
Representative Action Settlement filed by Plaintiff Alexander Montoya on
September 18, 2024 is GRANTED.
Prior
to the final fairness hearing, Plaintiff
should submit proof that the proposed settlement agreement was submitted to the
LWDA as Exhibit E to the Declaration of Roman Otkupman only shows that counsel
initiated a filing of the proposed settlement agreement with the LWDA. There is no confirmation that the LWDA
received the proposed settlement agreement.
It is so ordered.
Dated:
November 19, 2024
_______________________
MEL RED RECANA
Judge of the Superior Court