Judge: Michael P. Linfield, Case: 21STCV39911, Date: 2024-02-01 Tentative Ruling
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Case Number: 21STCV39911 Hearing Date: February 22, 2024 Dept: 34
SUBJECT: Continued Motion to Approve PAGA
Settlement
Moving Party: Plaintiff
Paola Villalvazo
Resp. Party: None
The Motion to Approve PAGA Settlement is
GRANTED, as modified in this Order.
BACKGROUND:
On October 29, 2021, Plaintiff Paola
Villalvazo filed her Complaint against Defendants SK Market, Inc., Advance Food
Market, Inc., and Jay’s Market Inc. on causes of action arising from
Plaintiff’s employment by Defendants.
On March 15, 2022, by request of
Plaintiff, the Court dismissed without prejudice the class and individual
claims from the Complaint, only leaving the claims involving the Labor Code
Private Attorneys General Act of 2004.
On October 27, 2022, Defendant SK
Market, Inc. filed its Answer to the Complaint.
On October 31, 2023, Plaintiff filed
Judicial Council Form CM-200, Notice of Settlement of Entire Case.
On January 8, 2024, Plaintiff filed her
Motion to Approve PAGA Settlement. In support of her Motion, Plaintiff
concurrently filed: (1) Memorandum of Points and Authorities; (2) Declaration
of Shani O. Zakay; (3) Declaration of Sean Hartranft; (3) Declaration of Paola
Villalvazo; (4) Declaration of Jean-Claude Lapuyade; (5) Proposed Order; and
(6) Proof of Service.
On January 9, 2024, Plaintiff filed: (1)
Supplemental Declaration of Jean-Claude Lapuyade; and (2) Proof of Service.
On February 2, 2024, Plaintiff filed:
(1) Second Supplemental Declaration of Jean-Claude Lapuyade; (2) Proof of Service
to the Labor and Workforce Development Agency; (3) two additional Proofs of
Service; and (4) Proposed Order.
ANALYSIS:
I.
Legal Standard
“This part shall
be known and may be cited as the Labor Code Private Attorneys General Act of
2004.” (Lab. Code, § 2698.)
“Notwithstanding
any other provision of law, any provision of this code that provides for a
civil penalty to be assessed and collected by the Labor and Workforce
Development Agency or any of its departments, divisions, commissions, boards, agencies,
or employees, for a violation of this code, may, as an alternative, be
recovered through a civil action brought by an aggrieved employee on behalf of
himself or herself and other current or former employees pursuant to the
procedures specified in Section 2699.3.” (Lab. Code, § 2699, subd. (a).)
In bringing an action pursuant to the Labor
Code Private Attorneys General Act of (2004) (“PAGA”), “the aggrieved employee
acts as the proxy or agent of state labor law enforcement agencies,
representing the same legal right and interest of those agencies, in a
proceeding that is designed to protect the public, not to benefit private
parties.” (Amalgamated Transit Union, Local 1756, AFL-CIO v. Super. Ct. (2009)
46 Cal.4th 993, 1003, citations omitted.)
PAGA claims, as well as
settlements of PAGA claims, involve multiple statutory requirements. (Lab.
Code, § 2699, et seq.)
II.
Discussion
The Court considers below the various
statutory requirements of PAGA, as well as whether the settlement meets the
fair, reasonable, and adequate standard.
A.
Proof of Service on the Labor and Workforce
Development Agency Prior to Commencement of Action, at Commencement of Action,
and Prior to Settlement of Action
1.
Legal Standard
“A civil action by an aggrieved employee pursuant to subdivision
(a) or (f) of Section 2699 alleging a violation of any provision listed in
Section 2699.5 shall commence only after the following requirements have been
met:
“(1)
“(A) The aggrieved employee or representative shall
give written notice by online filing with the Labor and Workforce Development
Agency and by certified mail to the employer of the specific provisions of this
code alleged to have been violated, including the facts and theories to support
the alleged violation.
“(B) A notice filed with the Labor and Workforce
Development Agency pursuant to subparagraph (A) and any employer response to
that notice shall be accompanied by a filing fee of seventy-five dollars ($75).
The fees required by this subparagraph are subject to waiver in accordance with
the requirements of Sections 68632 and 68633 of the Government Code.”
(Lab. Code, §
2699.3, subd. (a)(1)(A)–(B).)
“The provisions
of subdivision (a) of Section 2699.3 apply to any alleged violation of the
following provisions: subdivision (k) of Section 96, Sections 98.6, 201, 201.3,
201.5, 201.7, 202, 203, 203.1, 203.5, 204, 204a, 204b, 204.1, 204.2, 205,
205.5, 206, 206.5, 208, 209, and 212, subdivision (d) of Section 213, Sections
221, 222, 222.5, 223, and 224, paragraphs (1) to (5), inclusive, (7), and (9)
of subdivision (a) of Section 226, Sections 226.7, 227, 227.3, 230, 230.1,
230.2, 230.3, 230.4, 230.7, 230.8, and 231, subdivision (c) of Section 232,
subdivision (c) of Section 232.5, Sections 233, 234, 351, 353, and 403,
subdivision (b) of Section 404, Sections 432.2, 432.5, 432.7, 435, 450, 510,
511, 512, 513, 551, 552, 601, 602, 603, 604, 750, 751.8, 800, 850, 851, 851.5,
852, 921, 922, 923, 970, 973, 976, 1021, 1021.5, 1025, 1026, 1101, 1102,
1102.5, and 1153, subdivisions (c) and (d) of Section 1174, Sections 1194,
1197, 1197.1, 1197.5, and 1198, subdivision (b) of Section 1198.3, Sections
1199, 1199.5, 1290, 1292, 1293, 1293.1, 1294, 1294.1, 1294.5, 1296, 1297, 1298,
1301, 1308, 1308.1, 1308.7, 1309, 1309.5, 1391, 1391.1, 1391.2, 1392, 1683, and
1695, subdivision (a) of Section 1695.5, Sections 1695.55, 1695.6, 1695.7,
1695.8, 1695.9, 1696, 1696.5, 1696.6, 1697.1, 1700.25, 1700.26, 1700.31,
1700.32, 1700.40, and 1700.47, Sections 1735, 1771, 1774, 1776, 1777.5, 1811,
1815, 2651, and 2673, subdivision (a) of Section 2673.1, Sections 2695.2, 2800,
2801, 2802, 2806, and 2810, subdivision (b) of Section 2929, and Sections
3073.6, 6310, 6311, and 6399.7.” (Lab. Code, § 2699.5.)
“For cases filed
on or after July 1, 2016, the aggrieved employee or representative shall,
within 10 days following commencement of a civil action pursuant to this part,
provide the Labor and Workforce Development Agency with a file-stamped copy of
the complaint that includes the case number assigned by the court.” (Lab. Code,
§ 2699, subd. (l)(1).)
“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.” (Lab. Code, § 2699, subd.
(l)(2).)
2.
Discussion
Plaintiff filed causes of action for various
labor code violations, including violations of Labor Code sections 201, 202,
203, and others. These sections are covered by Labor Code section 2699.5, and
thus the pre-complaint notice requirement to the Labor Workforce Development
Agency (LWDA) applies here. (Lab. Code, § 2699.3, subd. (a).)
Plaintiff’s Counsel declares that Plaintiff
sent a notice letter to LWDA on August 25, 2021. (Decl. Lapuyade, ¶ 4 and Exh.
2.) The Court finds that this meets the notice requirement under Labor Code
sections 2699.3 and 2699.5.
Plaintiff’s Counsel provides evidence that
the notice letter to LWDA on August 25, 2021 also included a copy of the
Complaint in this matter. (Decl. Lapuyade, Exh. 2.) The Court finds that this
meets the notice requirement under Labor Code section 2699, subdivision (l)(1).
Plaintiff provides email evidence of
submission of a copy of the proposed settlement to LWDA at the same time that
it submitted the proposed settlement to the Court. (Lab. Code, § 2699, subd.
(l)(2); Decl. Lapuyade, Exh. 3.) Plaintiff further provides email evidence that
the fully-executed settlement agreement has been submitted to LWDA. (Supp.
Decl. Lapuyade, Exh. 2.) The Court finds that this meets the notice requirement
under Labor Code section 2699, subdivision (l)(2).
B.
The PAGA Settlement
1.
Legal Standard
“For all provisions of this code except those for which a civil
penalty is specifically provided, there is established a civil penalty for a
violation of these provisions, as follows: . . . (2) If, at the time of the
alleged violation, the person employs one or more employees, the civil penalty
is one hundred dollars ($100) for each aggrieved employee per pay period for
the initial violation and two hundred dollars ($200) for each aggrieved
employee per pay period for each subsequent violation.” (Lab. Code, § 2699,
subd. (f)(2).)
“For purposes of
this part, whenever the Labor and Workforce Development Agency, or any of its
departments, divisions, commissions, boards, agencies, or employees, has
discretion to assess a civil penalty, a court is authorized to exercise the
same discretion, subject to the same limitations and conditions, to assess a
civil penalty.” (Lab. Code, § 2699, subd. (e)(1).)
“In any action by
an aggrieved employee seeking recovery of a civil penalty available under subdivision
(a) or (f), a court may award a lesser amount than the maximum civil penalty
amount specified by this part if, based on the facts and circumstances of the
particular case, to do otherwise would result in an award that is unjust,
arbitrary and oppressive, or confiscatory.” (Lab. Code, § 2699, subd. (e)(2).)
“Except as
provided in subdivision (j), civil 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).)
“Except as
provided in paragraph (2), an aggrieved employee may recover the civil penalty
described in subdivision (f) in a civil action pursuant to the procedures
specified in Section 2699.3 filed on behalf of himself or herself and other
current or former employees against whom one or more of the alleged violations
was committed. Any employee who prevails in any action shall be entitled to an
award of reasonable attorney’s fees and costs, including any filing fee paid
pursuant to subparagraph (B) of paragraph (1) of subdivision (a) or
subparagraph (B) of paragraph (1) of subdivision (c) of Section 2699.3. Nothing
in this part shall operate to limit an employee’s right to pursue or recover
other remedies available under state or federal law, either separately or
concurrently with an action taken under this part.” (Lab. Code, § 2699, subd.
(g)(1).)
2.
Highlights of the Proposed PAGA Settlement
The following are the highlights of the
proposed PAGA settlement:
(1) Defendant SK
Market, Inc. will pay a gross settlement amount of $125,000.00 (the “Gross
Settlement Amount”).
(2) “PAGA Counsel” (who
are Plaintiff’s Counsel) will be paid up to one-third of the Gross Settlement
Amount (which would be $41,666.67) for fees. PAGA Counsel will also be paid up
to $20,000.00 (which is an additional 16% of the Gross Settlement Amount) in
expenses. Payment less than the amounts requested will be allocated to the
remainder of the “Net Settlement Amount” (which is the “Gross Settlement
Amount” minus these listed costs).
(3) Apex Class Action
LLC (the “Administrator”) will be paid up to $8,400.00, except for a showing of
good cause and as approved by the Court. This is 6.72% of the Gross Settlement
Amount. To the extent the Administration Expenses are less than $8,400.00 or
the Court approves payment less than $8,400.00, the remainder will be retained
in the Net Settlement Amount.
(4) Plaintiff will be
awarded a service award of not more than $10,000.00. If the Court approves a
service award less than the amount requested, the remainder will be retained in
the Net Settlement Amount.
(5) LWDA and the
Aggrieved Employees will receive 75% and 25%, respectively, of the remaining
$44,933.33.
(6) There are estimated
to be 363 Aggrieved Employees who worked a total of 19,893 PAGA-relevant pay
periods. The Aggrieved Employees will receive payments from the Administrator
based on a division of the employee share of the PAGA penalties that is
multiplied by each employee’s number of PAGA-relevant pay periods.
(7) Aggrieved Employees
will have up to 180 days to cash their settlement checks, after which those
checks will be voided, and the funds represented by such checks will be sent to
the State of California Unclaimed Property Fund in the names of the Aggrieved Employees
who did not cash their checks.
(8) Defendant SK
Market, Inc. has agreed to not receive any reversion from the Gross Settlement
Amount.
(9) The proposed PAGA
settlement also includes other terms, such as for distribution of the
settlement and release from claims.
(Supp. Decl. Lapuyade, Exh. 1.)
3.
Attorneys’ Fees and Attorneys’ Costs
PAGA Counsel requests $41,666.67 in
attorneys’ fees, which is one-third of the Gross Settlement Amount. PAGA
Counsel further requests $20,000.00 in costs, which is an additional 16% of the
Gross Settlement Amount.
Notably, Plaintiff has two sets of counsel:
JCL Law Firm, APC (“JCL”) and Zakay Law Group, APLC (“ZLG”).
According to Plaintiff’s Counsel, JCL spent
79.5 hours on this matter while ZLG spent 29.2 hours on this litigation. (Decl.
Lapuyade, ¶ 56.) Each firm has had multiple people work on this matter, and
these individuals charge a variety of hourly rates. In total, Plaintiff’s
Counsel claim that JCL incurred $39,507.50 in fees and that ZLG incurred
$14,087.50 in fees, for a total of $53,595.00 in fees. (Ibid.)
The Court has reviewed the hourly rates and
finds them to be reasonable.
However, the Court has also reviewed the
invoices and finds that there has been a significant amount of overbilling on
fees. For example, JCL claims 1.54 hours for “Legal Research – Motion to Strike
and Demurrer Answer”, even though no demurrer or motion to strike was filed and,
at least in this Court’s analysis, demurrers to answers are nearly always
frivolous. As another example, JCL claims to have spent more than 8.5 hours
drafting the Complaint while ZLG claims to have spent an additional four hours
drafting the Complaint. The Complaint consists of mostly boilerplate language
and very few specifics as to Plaintiff and her case; it is unreasonable for
counsel to have spent more than 12.5 hours of attorney time drafting the
Complaint.
In reducing the attorney’s fees and costs
(see below), the Court considers two main factors.
First, the Court could reduce the attorney’s
fees to zero. “If . . . the Court were required to award a reasonable fee when
an outrageously unreasonable one has been asked for, claimants would be
encouraged to make unreasonable demands, knowing that the only unfavorable
consequence of such misconduct would be reduction of their fee to what they
should have asked in the first place. To discourage such greed, a severer
reaction is needful.” (Serrano v. Unruh (1982) 32 Cal.3d 621, 635,
cleaned up.) “A fee request that appears unreasonably inflated is a special
circumstance permitting the trial court to reduce the award or deny one
altogether.” (Chavez v. City of Los Angeles (2010) 47 Cal.4th 970, 990; Ketchum
v. Moses (2001) 24 Cal.4th 1122, 1137; Serrano v. Unruh (1982) 32
Cal.3d 621, 635.)
Second, at this stage of the PAGA action, we
have entered a zero-sum game. The more that the attorneys receive in attorney’s
fees and costs (or the more that the Administrator receives or that the
Plaintiff receives as a service award), the less remains for each aggrieved
employee. Thus, the Court must balance two competing interests: 1) the Court wants to encourage attorneys to
take PAGA cases, yet 2) the interests of the attorneys and the aggrieved
employees are opposed.
The Court will allow PAGA Counsel to recover
$30,000.00 in attorney’s fees from the Gross Settlement Amount. PAGA Counsel
may determine for themselves how they will split that amount between their two
firms. The remainder of $11,666.67 that was allocated for fees in the
settlement shall be retained in the Net Settlement Amount.
As to costs, the Court has reviewed the cost
invoices by JCL and ZLG and finds that there has also been a significant amount
of overbilling on costs.
First of all, PAGA Counsel admit that their
invoices only add up to $13,153.83, not $20,000.00. (Memorandum, p. 17:13–15.)
Second, certain costs — such as charging
$1,491.01 on October 29, 2021 for filing the Complaint — appear to be examples
of overbilling. (Decl. Lapuyade, Exh. 5, p. 1.) Indeed, to the extent higher
costs were incurred for the initial filing of a complex case, the Minute Order
dated May 19, 2022 ordered that those fees were to be refunded — yet no such
refund is included in the invoices.
Finally, the Court did not order mediation in
this case. Rather, the Court only ordered the Parties’ respective counsel to
meet and confer regarding mediation. (See Minute Order dated August 3, 2022;
see also Minute Order dated April 17, 2023.) The Court declines to award
combined mediation costs of $8,237.50. (Decl. Zakay, Exh. 2, p. 2, listing
$4,237.50 in mediation costs; Decl. Lapuyade, Exh. 5, p. 1, listing $4,000.00
in mediation costs.)
Considering that only $13,153.83 in costs
were actually claimed and that more than $9,000.00 in costs were either
overbilled or are not allowed, the Court will allow PAGA Counsel to recover
$4,000.00 in costs. This amount reasonably covers the actual costs reasonably
incurred, including the costs for the expert retained in this matter. The
remaining $16,000.00 that was allocated for costs in the settlement shall be
retained in the Net Settlement Amount.
The Court notes that
Plaintiff’s Counsel makes further arguments on attorney’s fees and costs.
(Second Supp. Decl. Lapuyade, pp. 2–5.) These arguments, which essentially
reargue why the fees were incurred and why mediation was necessary, do not
change the Court’s analysis above. In summary, the Court awards $30,000.00 in
attorney’s fees and $4,000.00 in costs, which shall come from the Gross
Settlement Amount. The remainder is to revert to the Net Settlement Amount, to
be split 75% to LWDA and 25% to the Aggrieved Employees.
4.
PAGA Administrator Costs
PAGA Counsel requests that the Administrator
be paid up to $8,400.00 (which is 6.72% of the Gross Settlement Amount) for expenses
incurred in administering the settlement.
The Administrator provides an invoice that
shows the expected costs for administering the settlement. (Decl. Hartranft,
Exh. B.)
The invoice is concerning.
First, the Administrator appears to charge multiple
unclear and/or unnecessary items, such as $300.000 for “project management
reconciliation” and $360.00 for “declarations.”
Second, the Administrator charges
unreasonable prices for certain items, such as $1,200.00 for a certified
language translation to Spanish.
Finally, the overall cost of this service —
$8,400.00 — is thousands of dollars more than the Court has previously seen
other administrators charge for a similar number of affected employees.
The Court will allow a maximum of $5,000.00
in administration costs. The remaining $3,400.00 that was allocated for
administration costs in the settlement shall be retained in the Net Settlement
Amount. Any further amount unspent in administration costs shall also be
retained in the Net Settlement Amount.
The Court notes that
Plaintiff’s Counsel makes further arguments on the Administrator’s costs.
(Second Supp. Decl. Lapuyade, pp. 5–6.) In addition to rearguing why these
costs are fair and reasonable, Plaintiff’s Counsel cite multiple other cases in
which similar amounts were allowed by a reviewing trial court. (Ibid.)
Yet this Court must consider whether the costs in this case — not in other
cases — are fair reasonable. Here, the Court has assessed the invoice and found
that $8,400.00 for the services proposed is not fair or reasonable. Plaintiff’s
Counsel has not provided sufficient reasoning or documentation that addresses
the concerns listed by the Court above.
5.
Remaining Civil Penalties for LWDA and Aggrieved
Employees
PAGA Counsel requests that LWDA and the
Aggrieved Employees receive 75% and 25%, respectively, of the Net Settlement
Amount.
This division of the civil penalties is
required pursuant to Labor Code section 2699, subdivision i.
This division would be appropriate, with any
further savings from the Administrator’s costs being split similarly.
6.
Reversion of Funds
The settlement agreement gives Aggrieved
Employees up to 180 days to cash their settlement checks, after which those checks
will be voided. The funds represented by such checks will be sent to the State
of California Unclaimed Property Fund in the names of the Aggrieved Employees
who did not cash their checks.
The Court finds that these
terms are appropriate.
7.
Plaintiff’s Service Award
PAGA Counsel request that Plaintiff obtain a
$10,000.00 service award as “fair and reasonable compensation for the
Plaintiff’s efforts bringing the action, assisting PAGA Counsel with the
litigation and settlement, regularly conferring with PAGA Counsel on the status
of her case and the strategies for prosecuting the claims and agreeing to
provide Defendant a broad general release of all claims arising out of her
employment.” (Memorandum, p. 18:5–9.) PAGA Counsel further note that “Plaintiff
assumed the serious risk of liability for Defendant’s costs and potentially
fees if the case was unsuccessful.” (Id. at p. 18:11–12.)
Among other things,
Plaintiff declares that she has been “actively involved with this action” and
that she was “in regular contact with [her] attorneys, reviewed important court
filings, and spent considerable time on the issues presented during the
litigation and in the settlement process.” (Decl. Villalvazo, ¶ 8.) She
estimates that she spent approximately twenty hours working on this case. (Ibid.).
The Court does not doubt
that Plaintiff was actively involved in this case. However, the Court wonders
why a non-attorney plaintiff should be compensated for reviewing “important
court filings”; presumably, this is why Plaintiff’s counsel studied for three
years in law school and ultimately passed the bar. Further, accepting that
Plaintiff spent “approximately 20 hours working on this case” [Decl.
Villalvazo, ¶ 8], a $10,000 service award would be the equivalent of paying
Plaintiff $500.00/hour. By comparison, Plaintiff’s
lead counsel, Jean-Claude Lapuyade, charges $550.00/hour. (See, e.g., Lapuyade
Declaration, ¶ 52.) Other attorneys in the
JCL law firm charge substantially less. (See
Second Supplemental Declaration of Lapyade, Exh. 3.)
The Court will grant
Plaintiff a service award of $5,000.00. The remaining $5,000.00 is to be added
to the Settlement Amount to be distributed to all aggrieved employees.
Plaintiff’s Counsel reargues
why Plaintiff should receive $10,000.00 for the service award. (Second Supp.
Decl. Lapuyade, ¶ 26.) According to Plaintiff’s Counsel, “the Service Award is
the sole consideration for [Plaintiff] granting a broad general release and is
fair compensation for the general release.” (Ibid.)
The Court questions the
veracity of this claim On March 15, 2022, Plaintiff requested that the
Court dismiss her class and individual claims from the Complaint, only leaving
the claims involving the Labor Code Private Attorneys General Act of 2004. The
Court granted Plaintiff’s request.
If the “service award” is an award for
both her service and a partial settlement by the Parties to cover
Plaintiff’s dismissed individual claims, then the Court might consider awarding
$10,000.00 to Plaintiff. However, the Court has not been presented with
evidence that would demonstrate why Plaintiff should receive more than
$5,000.00 for her service in this case.
8.
Notice of Release of Claims
PAGA Counsel provides a copy of the proposed
notice to the Aggrieved Employees. (Second Supp. Decl. Lapuyade, Exh. 1.A.)
The Court is satisfied with the proposed
notice.
C.
The Fair, Reasonable, and Adequate Standard
1.
Legal Standard
The Court of Appeal has held “that 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.” (Moniz v. Adecco USA, Inc.
(2021) 72 Cal.App.5th 56, 77, citations omitted.)
“Despite the fact
that a representative action under PAGA is not a class action, and is instead a
type of qui tam action, a standard
requiring the trial court to determine independently whether a PAGA settlement
is fair and reasonable is appropriate. . . . Because many of the factors used
to evaluate class action settlements bear on a settlement’s fairness—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—these factors can be useful in evaluating the fairness of a PAGA
settlement.” (Moniz, supra, at pp. 76–77.)
2.
Discussion
PAGA Counsel provides a detailed explanation
of the Parties’ settlement negotiations and PAGA Counsel’s reasoning for why
the settlement is fair, reasonable, and adequate. (Decl. Lapuyade, pp. 5–12.)
This explanation includes an analysis of the total amount of possible claims,
PAGA Counsel’s discounting to those claims based on Defendant’s arguments, and
various litigation risks. (Ibid.)
In addition, Plaintiff separately declares
that she believes the proposed settlement is fair, reasonable, and adequate.
(Decl. Villalvazo, ¶ 9.)
The Court finds that the settlement meets the
fair, reasonable, and adequate standard.
II.
Conclusion
The Motion to Approve PAGA Settlement is
GRANTED, as modified in this Order.