Judge: Michael P. Linfield, Case: 19STCV23556, Date: 2022-10-31 Tentative Ruling

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Case Number: 19STCV23556    Hearing Date: October 31, 2022    Dept: 34

SUBJECT:         Joint Notice of PAGA Settlement

Moving Party:  Joint Notice by Plaintiffs and Defendant

Resp. Party:    None

PRELIMINARY COMMENTS:

Even if the Parties have stipulated to the settlement, the PAGA settlement must be approved by the Court.  Therefore, the proper procedure is for counsel to file a notice motion for Approval of PAGA Settlement.

Nonethless, the Court will give some guidance in this Order so that a future motion conforms with the Court’s requirements for approval of a PAGA settlement. Counsel may wish to submit competent Declarations with any motion to aide in remedying some of the deficiencies discussed below.

BACKGROUND:

        On July 3, 2019, Plaintiffs Alexandrya Camacho and Skyler Wilsey, individually and on behalf of other aggrieved employees, filed their Complaint against Defendant Wheels Labs, Inc. on a cause of action pursuant to the Private Attorney General Act of 2004 (“PAGA”).

        On August 30, 2019, Plaintiffs filed their First Amended Complaint.

        On February 25, 2020, Plaintiffs filed their Second Amended Complaint. Ozzy Salmeron-Langunas was added as a Plaintiff in the Second Amended Complaint.

        On March 26, 2020, Defendant filed its Answer to the Second Amended Complaint.

        On August 4, 2022, the Parties filed their Joint Notice of Settlement and Request to Vacate the Trial Date and All Related Deadlines. Among other things, the Joint Notice states that “a settlement has been reached in the above-captioned PAGA case” and that the Parties “will submit a motion for final approval of the PAGA settlement to the Court.” (Joint Notice, p. 2:3–4.)

        On October 17, 2022, the Parties filed their Stipulation and Proposed Order to Approve PAGA Settlement Agreement.

        No opposition or other response has been filed.

ANALYSIS:

   I.        Legal Standard

A.          The PAGA

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].” (Id.)

B.          Settlement Generally

In reviewing the terms of a settlement agreement, the Court determines whether the settlement is fair, reasonable, and adequate to all concerned, and not the product of fraud, collusion, or overreaching. (Reed v. United Teachers Los Angeles (2012) 208 Cal.App.4th 322, 337; Nordstrom Commission Cases (2010) 186 Cal.App.4th 576, 581.) Although a PAGA plaintiff need not satisfy class action requirements (see Arias v. Superior Court (2009) 46 Cal.4th 969, 975), general principles applicable to class action settlements apply equally in this context. In the context of a class action settlement, the court considers various factors including whether (1) the settlement is the result of 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. (Nordstrom, at 581; Wershba v. Apple Computer, Inc. (2001) 91 Cal.App.4th 224, 245.) In considering the amount of settlement, the court is mindful that compromise is inherent and necessary in the settlement process. (Id. at 250.)

II.        Discussion

A.          Proof of Service on the LWDA

A proposed PAGA settlement must be submitted to the LWDA at the same time that it is submitted to the Court for review and approval. (Lab. Code, § 2699, subd. (l)(2).)

        The Joint Notice does not declare that Plaintiff submitted a copy of the Settlement with the LWDA at the same time the Settlement was filed with the Court. Counsel also fail to attach any evidence that the Settlement was submitted to LWDA, such as a confirmation email from LWDA.

Therefore, Plaintiff fails to demonstrate that the proposed PAGA settlement was sent to the LWDA. (Lab. Code, § 2699, subd. (l)(2).) For this reason alone, the Court cannot approve the Settlement.

B.          Terms of the PAGA Settlement

Among other things, the following are the highlights of the proposed PAGA settlement amount:

(1)       Defendants will pay a PAG settlement amount of $650,000.00 (the “Maximum Settlement Amount”);

(2)       PAGA Counsel (who are Plaintiffs’ Counsel) will be paid attorneys’ fees in an amount up to $260,000.00 (40% of) the Maximum Settlement Amount;

(3)       PAGA Counsel will also be paid up to $28,118.82 in costs from the Maximum Settlement Amount;

(4)       The settlement administrative costs will be $26,620.00, paid to Simpluris, Inc.;

(5)       Each of the three Plaintiffs will be paid an enhancement payment of $15,000.00 from the Maximum Settlement Amount, which is in addition to what they are each entitled to receive as aggrieved employees;

(6)       The Net Settlement Amount will be $290,261.18, which is the Maximum Settlement Amount less the other costs, fees, and payments listed above;

(7)       LWDA will receive $217,695.89, which is 75% of the Net Settlement Amount;

(8)       PAGA Members will receive $72,565.29, which is 25% of the Net Settlement Amount;

(9)       The Joint Notice does not list the exact or an approximate number of PAGA Members, but they are defined as “all individuals who worked for Defendant Wheels Labs, Inc. in California during the Covered Period [November 6, 2018 through the date of the order approving the settlement] as Mechanics, directly or on assignment from a labor contractor, or as Transporters”; and

(10)    PAGA Members will have up to 120 days to cash their settlement checks, after which those checks will be sent to the State of California Unclaimed Property Fund in those respective PAGA Members’ names.

(Joint Notice, ¶¶ 5­–8, 12­–17, 20.)

        The proposed PAGA settlement also includes other terms, such as for distribution of the settlement and release from claims.

C.          Analysis of the Civil Penalties

The Joint Notice provides a detailed explanation of the Parties’ settlement negotiations, including: (1) two private mediations, months of continued settlement negotiations, and Plaintiffs’ thorough investigation into time records, payroll records, employment records, Defendant’s financial records, Defendant’s discovery responses, and interviews with numerous employees and witnesses. (Joint Notice, ¶¶ 2­–3.)

        The Court finds that the circumstances surrounding the negotiation and resulting settlement agreement demonstrate that the agreement represents an arm’s length transaction untainted by fraud, collusion, or self-dealing.  (See Kullar v. Foot Locker Retail, Inc. (2008) 168 Cal.App.4th 116, 130.)

D.          Reversion of Funds

The proposed PAGA settlement includes the following provision:

No later than five (5) calendar days after receipt of the Maximum Settlement Amount from Defendant, the Settlement Administrator shall mail settlement checks to the Aggrieved Employees. Aggrieved Employees shall have one hundred and twenty (120) days to cash their settlement checks. Any settlement checks not cashed after 120 days from the date of mailing shall be sent to the State of California Unclaimed Property Fund in the Aggrieved Employee’s names.

(Joint Notice, ¶ 20.)

Nothing within the notice of PAGA Settlement provides notice to PAGA Members that the funds will revert to the State. (Joint Notice, Ex. A.)

While the Court agrees that these funds should revert to the State, and not to the employer, there should be notice of the reversion in the notice of settlement.

E.           PAGA Settlement Administrator Costs

The proposed PAGA settlement includes Simpluris, Inc. as the Settlement Administrator and notes that the Settlement Administrator’s costs will be in the amount of $26,200.00. (Joint Notice, ¶¶ 6, 17.)

However, the Joint Notice does not explain why $26,200.00 is a reasonable amount for Simpluris Inc.’s administration costs.

Given the information presented, the Court cannot determine whether it is reasonable to award costs in the requested amount of $26,200.00.

F.           Enhancement Award

The purpose of an enhancement award is to incentive aggrieved employees to undertake the risks associated with serving in a representative capacity.  (See Bell v. Farmers Ins. Exchange (2004) 115 Cal.App.4th 715, 726 [“service payments” compensate named plaintiff “for their efforts in bringing the action”]; Ingram v. The Coca-Cola Co. (N.D.Ga. 2001) 200 F.R.D. 685, 694 [“ ‘Courts routinely approve incentive awards to compensate named plaintiffs for the services they provided and the risks they incurred during the course of the class action litigation’ ”].)

Plaintiffs each request an enhancement award of $15,000.00, for a total of $45,000.00. (Joint Notice, ¶¶ 14, 17.) The only information provided for why this is reasonable is that “Plaintiffs and their counsel have conducted a thorough investigation into the facts of this case, including reviewing the time records, payroll records, employment records, Defendant’s financial records, as well as Defendant’s discovery responses in this case.” (Joint Notice, ¶ 3.)

Given the little evidence presented to the Court, the Court’s initial reaction is that $15,000.00 per plaintiff is substantially more than is necessary as an enhancement award. The Court needs more evidence to determine whether it is reasonable to award enhancement awards of $15,000.00 per Plaintiff.

G.          Attorney Fees and Costs

A prevailing employee is entitled to an award of reasonable attorney fees and costs incurred in the action.  (Lab. Code § 2699, subd. (g)(1).)

The Court has not been provided with Counsel’s number of hours worked, hourly rate, or justification for number of hours worked and hourly rate. Nor has the Court been provided with any breakdown of the costs incurred in this matter.

Given the evidence presented, the Court cannot determine whether it is reasonable to award the attorneys’ fees and costs requested. The Court’s initial reaction is that attorneys’ fees in the amount of 40% of the Maximum Settlement Amount appears to be prima facie unreasonable.

H.          Notice of Release of Claims

In what the Court presumes to be the Notice of Settlement, the Parties provide a copy of a letter. (Joint Notice, Ex. A.) In part, the letter states:

Please note that this check only covers claimed civil penalties. Cashing this check does not affect your right to bring other claims against Wheels Labs, Inc.

(Id.)

In previous PAGA cases, the Court has required that the Notice of PAGA Settlement clearly state the following in bold letters and/or in a boxed format:

Without such language in the Notice of PAGA Settlement, the Court is likely to find that such notice to the PAGA Members is insufficient.

III.        Conclusion

        For the reasons described above, the Court cannot determine whether the entire settlement is fair, reasonable and adequate for those concerned.

SUBJECT:         Motion to be Relieved as Counsel

Moving Party:  Defendant’s Counsel Aaron H. Cole

Resp. Party:    None

        Counsel Cole’s Motion to be Relieved as Counsel is GRANTED.     

PRELIMINARY COMMENT:

        As indicated below, the Court will grant this motion.  However, given that the Court is not approving the PAGA settlement today, the Court would like to inquire whether Counsel wishes its motion to be relieved to be granted as of today, or whether counsel wishes to remain as counsel pending approval of the PAGA settlement.

BACKGROUND:

        On July 3, 2019, Plaintiffs Alexandrya Camacho and Skyler Wilsey filed their Complaint against Wheels Labs, Inc. on a cause of action for violation of the Private Attorney General Act of 2004.

        On February 25, 2020, Plaintiffs filed their Second Amended Complaint.

        On March 26, 2020, Defendant filed its Answer to the Second Amended Complaint.

        On August 8, 2022, the parties filed their Joint Notice of Settlement and Request to Vacate the Trial Date and all Related Deadlines, which the Court so ordered that same day.

        On September, Defendant’s Counsel Aaron H. Cole filed his Motion to be Relieved as Counsel. Counsel Cole concurrently filed: (1) Declaration in Support of the Motion; and (2) Proposed Order.

        No oppositions or other responses have been filed regarding this Motion.

ANALYSIS:

An attorney moving to be relieved as counsel under California Code of Civil Procedure section 284(2) must meet the requirements set out in California Rules of Court, rule 3.1362. To comply with rule 3.1362, the moving party must submit the following forms: (1) Notice of Motion and Motion to be Relieved as Counsel; (2) Declaration in Support of Attorney's Motion to be Relieved as Counsel; and (3) Order Granting Attorney's Motion to be Relieved as Counsel. (Cal. Rules of Court, rule 3.1362(a), (c), (e).) The moving party must serve these forms on the client and all other parties who have appeared in the case. (Cal. Rules of Court, rule 3.1362(d).) Further, when the client is served by mail, the attorney's declaration must show that the client's address was confirmed within the last 30 days and how it was confirmed. (Id.)  Absent a showing of resulting prejudice, an attorney’s request for withdrawal should be granted.  (People v. Prince (1968) 268 Cal.App.2d 398, 406.)

Counsel Cole’s Motion complies with all of the requirements of California Rules of Court, rule 3.1362, in that Counsel provided notice of motion and motion to be relieved as counsel; proposed order granting attorney’s motion to be relieved as counsel; and declaration in support of the motion to be relieved as counsel. Additionally, the declaration states that Counsel’s client has been served by mail and Counsel confirmed by telephone within the last 30 days that the addresses are current. (See Declarations, No. 3(a)(2) and (b)(1)(b).) Counsel also filed proof of service demonstrating he served all other parties who have appeared in the case. The motion has not been opposed by any party to the case. There does not appear to be any risk of prejudice to Defendant as the parties have already settled and there is currently no Trial date.

 Accordingly, Counsel Cole’s Motion to be Relieved as Counsel is GRANTED.