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.