Judge Michael P. Linfield, Case 21STCV41422 2022-09-20 Tentative Ruling

Judge: Michael P. Linfield, Case: 21STCV41422, Date: 2022-09-20 Tentative Ruling

Case Number: 21STCV41422 Hearing Date: September 20, 2022 Dept: 34

SUBJECT: Plaintiff Ebonee Chambers’ Motion for Approval of Settlement of Claims Brought under the Private Attorneys General Act and Reasonable Attorney Fees and Costs

Moving Party: Plaintiff Ebonee Chambers

Resp. Party: None

Plaintiff Ebonee Chambers’ Motion for Approval of Settlement of Claims Brought under the Private Attorneys General Act and Reasonable Attorney Fees and Costs is DENIED.

I. BACKGROUND

On November 10, 2021, Plaintiff Ebonee Chambers (“Chambers”), individually and on behalf of other aggrieved employees, filed a complaint against Defendants Action Youth America, LLC, Claudia Villalba, and Does 1 through 100, inclusive, to allege the following causes of action:

1. Discrimination (Cal. Govt. C. §§12900, et seq.);

2. Failure to Take Reasonable Steps to Prevent Discrimination (Cal. Gov’t C. §§12900, et seq.);

3. Retaliation (Cal. Govt. C. §§12900, et seq.);

4. Failure to Accommodate (Cal. Gov’t C. §§12900 et seq.);

5. Failure to Engage in the Interactive Process (Cal. Gov’t Code §§12940 et seq.);

6. Wrongful Termination in Violation of Public Policy;

7. Failure to Pay Minimum Wages (Cal. Lab. C. §§ 1182.12, 1194, 1194.2, 1197 and 1197.1);

8. Failure to Pay Overtime Wages (Cal. Lab. C. §§ 510, et seq.);

9. Failure to Provide Meal Periods (Cal. Lab. C. §§ 226.7, 512, et seq.);

10. Failure to Provide Rest Periods (Cal. Lab. C. §§ 226.7, 512, et seq.);

11. Failure to Provide Accurate Wage Statements (Cal. Lab. C. §§ 226, et seq.);

12. Failure to Timely Pay Wages Upon Termination (Cal. Lab. C. §§ 201-203);

13. Failure to Indemnify for Business Expenses (Cal. Lab. C. §§ 2802);

14. Unfair Competition (Cal. Bus. & Prof. C. §17200, et seq.); and

15. Private Attorney General Act (Cal. Lab. C. § 2698, et seq.)

On February 10, 2022, Defendants Action Youth America, LLC, and Claudia Villalba moved the Court “pursuant to Sections 1281.2 and 1281.4 of the California Code of Civil Procedure, for an order to (1) compel Plaintiff Ebonee Chambers to submit her individual claims to binding arbitration, and (2) stay the representative claim brought under the Private Attorneys General Act (“PAGA”) and all civil court proceedings pending completion of the arbitration, on the grounds that there is a valid, written arbitration agreement between the parties.” (Motion, filed February 10, 2022, p. 2:5-10.)

On February 16, 2022, Chambers filed a Request for Dismissal to dismiss causes of action 1 through 14 only.

On February 22, 2022, the Court dismissed the First through Fourteenth Causes of Action in the present case.

On February 23, 2022, Plaintiff Ebonee Chambers filed an opposition to Defendant’s motion.

On March 1, 2022, Defendants filed a reply to Chambers’ opposition.

On March 8, 2022, the Court denied Defendants Action Youth America, LLC, and Claudia Villalba’s Motion to Compel Arbitration and Stay Action.

On August 23, 2022, Plaintiff Ebonee Chambers moved the Court for orders:

1. “Granting approval, pursuant to California Labor Code section 2699(l)(2), of the settlement between Plaintiff and Defendants Action Youth America, LLC and Claudia Villalba (“Defendant”) of the claims brought pursuant to the Private Attorneys General Act of 2004 (“PAGA”), as set forth in the Stipulation and Settlement of Private Attorneys General Act Representative Claims and Plaintiff’s Individual Claims (“Settlement,” “Agreement,” or “Settlement Agreement”), attached as “EXHIBIT A” to the Declaration of Aidin Ghavimi, including and not limited to, the plan of allocation and distribution of the Total Settlement Consideration for payment to the California Labor and Workforce Development Agency (“LWDA”), Individual Settlement Payments to the PAGA Settlement Members, Plaintiff’s Counsel Payment to Plaintiff’s Counsel, Settlement Administration Costs to the Settlement Administrator, and Service Award to Plaintiff;

2. Approving the PAGA Settlement Amount, estimated to be no less than $75,000.00.

3. Appointing Phoenix Settlement Administrators (“Phoenix”) as the Settlement Administrator;

4. Directing Defendants to deposit the Total Settlement Consideration of $75,000.00 into an account for administration of the Settlement, and directing the Settlement Administrator to distribute the Total Settlement Consideration in accordance with the Settlement Agreement; seventy-five percent (75%) of the Net PAGA Settlement Amount will be paid to the LWDA (“LWDA Payment”) and twenty-five percent (25%) will be paid to the PAGA Members (“Individual Settlement Payments”) pursuant to California Labor Code section 2699(i).

5. Directing the mailing of Individual Settlement Payment checks to the PAGA Settlement Members.

6. Awarding up to $3,750.00 to the Settlement Administrator for Settlement Administration Costs; and

7. Awarding to Plaintiff’s Counsel, Starpoint, LC, $27,000.00 as compensation for reasonable attorneys’ fees and $1,793.82 for reimbursement of litigation costs and expenses (“Attorney’s Fees and Costs”), pursuant to California Labor Code section 2699(g)(1)). The Settlement Agreement and moving and supporting papers are concurrently submitted to the California Labor and Workforce Development Agency in conformity with California Labor Code section 2699(l)(2).” (PAGA Motion, p. ii:7--iii:6.) No opposition to this motion has been filed.

II. ANALYSIS

A. Legal Standard

1. The PAGA

The Private Attorneys General Act (“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; Ochoa-Hernandez v. Cjaders Foods, Inc. (N.D.Cal. 2010) 2010 WL 1340777, at p. *4.)

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].” (Ibid.)

2. 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 p. 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. (Wershba, at p. 250.)

B. Discussion

1. 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. (Labor Code, § 2699, subd. (l)(2).)

The Court finds no evidence that the parties submitted their settlement to LWDA at the same time that it was submitted to the Court for review and approval. (Lab. Code, § 2699, subd. (l)(2).)

For this reason alone, approval of the Settlement must be denied.

However, for the parties’ information, the Court will also address some of the substantive issues arising from the proposed settlement; thus, the parties can address these substantive changes when they resubmit their settlement for approval by this Court.

2. Terms of the PAGA Settlement

Chambers, the PAGA Members, and the State of California release and discharge the Released Parties from the following claims:

“The Released Claims include all claims arising from or related to the facts and claims alleged in the Action, or that could have been raised in the Action based on the facts and claims alleged, as amended. The PAGA Released Claims include all claims for unpaid wages, including, failure to pay minimum wages, straight time compensation, overtime compensation, double-time compensation, and interest; the calculation of the regular rate of pay; missed meal period and rest-period premiums, including failure to pay premiums at the regular rate of compensation; reimbursement for all necessary business expenses; payment for all hours worked, including off-the-clock work; failure to timely pay wages, including upon termination; wage statements; deductions; failure to keep accurate records; failure to provide accurate itemized wage statements; failure to indemnify for business expenses; unfair business practices; penalties, including, but not limited to, civil penalties, statutory penalties, recordkeeping penalties, wage statement penalties, minimum-wage penalties, and waiting-time penalties; and attorneys’ fees and costs; all claims for PAGA statutory penalties which are asserted in the Complaint or which could have been asserted based on the factual allegations pled in the Complaint arising under: the California Labor Code (including, but not limited to, sections 90.5200, 201, 201.1, 201.3, 201.5, 202, 203, 204, 204b, 204.1, 204.2, 204.11, 205, 205.5, 206, 210, 216, 218, 218.5, 218.6, 221, 222, 222.5, 223, 224, 225, 225.5, 226, 226.3, 226.7, 226.8, 227.3, 246, 256, 450, 510, 511, 512, 516, 550, 551, 552, 558, 1174, 1174.1, 1174.5, 1182.12, 1194, 1194.2, 1197, 1197.1, 1197.2, 1197.5, 1198, 2751; 2802, 2804, 2810.5 2698 et seq., and 2699 et seq), Wage Order 5-2001 of the California Industrial Welfare Commission.” (Ghavimi Decl., ¶ 13, Ex. A., § I., subsection P.)

The Gross Settlement Amount, “no more than $125,000.00 gross”, is the sum to be paid by Defendant “in full satisfaction of all claims alleged in and arising from the Action and as consideration of the Released Claims. The Settlement Amount includes all Individual Settlement Payments to PAGA Members, payment to Plaintiff in her individual capacity (for her released claims) and as the PAGA representative, Settlement Administration Costs to the Settlement Administrator, the Labor and Workforce Development Agency Payment, and all Attorney’s Fees and Costs related to the settlement of the PAGA claims and the Plaintiff’s individual claims.” (Ghavimi Decl., ¶ 13, Ex. A., § I., subsection E.)

The Net Settlement Amount is the “portion of the Settlement Amount remaining after deduction of the approved Settlement Administration Costs, PAGA Settlement Amount, Plaintiff’s Payment for PAGA representation and Settlement of Individual Claims, and the Attorney’s Fees and Costs.” (Ghavimi Decl., ¶ 13, Ex. A., § I., subsection J.) The Net PAGA Settlement Amount equals “Thirty-Nine Thousand and Five Hundred Dollars ($39,500.00) or the portion of the Settlement Amount remaining after deduction of the approved Settlement Administration Costs (or $5,000.00), and the Attorney’s Fees and Costs related to the PAGA claim ($30,500.00).” (Ghavimi Decl., ¶ 13, Ex. A., § I., subsection I.)

The LWDA Payment is the “amount that the Parties have agreed to pay to the LWDA in connection with the claims asserted under the PAGA. The Parties have agreed that $75,000.00 of the Settlement Amount will be allocated to the resolution of any PAGA Member’s claims arising under the PAGA (“PAGA Settlement Amount”). Per Labor Code § 2699(i), seventy-five percent (75%) of Net PAGA Settlement Amount, or $29,625.00 will be payable to the LWDA, and the remaining twenty-five percent (25%), or $9,875.00 of the PAGA Settlement Amount will be paid to the PAGA Members. (Ghavimi Decl., ¶ 13, Ex. A., § I., subsection H.) Chambers requests Court approval for $50,000.00 in settlement funds “for her general release of her individual claims” subject to Court approval, in the following amounts (Ghavimi Decl., ¶ 13, Ex. A., § I., subsection Q.):

a) “$5,000.00 allocated for settlement of Chambers individual wage claims.

b) $22,500 allocated for settlement of Chambers’ non-wage damages

c) $20,000.00 for attorney’s fees for Chambers’ individual claims

d) $2,500.00 for Chambers as PAGA representative.” (Id.)

The Court notes that the instant motion offers a different description of the Net PAGA Settlement Amount.

“The Net PAGA Settlement Amount will be the PAGA Settlement Amount less the following amounts: (1) Attorneys’ Fees and Costs consisting of attorneys’ fees of up to $27,000.00 and reimbursement of litigation costs and expenses of $1,793.82 to PAGA Counsel; (2) Service Award of $2,500.00 to Plaintiff; and (3) Settlement Administration Costs of up to $3,750.00 to Phoenix Settlement Administrators (“Phoenix”). (Ghavimi Decl., ¶13, Ex. A, section I., subsection I.; Lawrence Decl. ¶13, Ex. B). The Net PAGA Settlement Amount will be fully distributed to the PAGA Settlement Members and the LWDA.” (Ghavimi Decl., ¶13, Ex. A, section I., subsections F. and H.)

The motion offers no explanation for this second Net PAGA Settlement formulation.

The Court calculates that the average reimbursement for each aggrieved employee will be approximately 27 dollars ($9,875.00/363 employees). (See Ghavimi Decl., ¶¶ 10; Exh. A, ¶I(H)

3. Analysis of the Civil Penalties

Chambers’ counsel explains the Parties’ negotiations as follows:

“The parties engaged in early informal exchange of information and documents. Defendant provided a sample of potentially aggrieved employees for October of 2020, October of 2021, and June of 2022. Defendant represented that the number of potentially aggrieved employees fluctuated due to the pandemic. In October of 2020, Defendant employed 185 employees; in October of 2021, Defendant employed 336 employees (125 from prior year and 211 new); and in June of 2022, Defendant employed 363 employees (165 from the prior year and 27 new). As part of informal discovery, Defendant produced its employee manual, Plaintiff’s time sheets and wage statements, and a representative sampling of 15 employee wage statement from which Plaintiff was able to extrapolate and assess penalties.

“The Parties hotly negotiated liability and damages from approximately August 2021 through June 2022. During the negotiations, the Parties discussed the case at length, including the relative strengths and weaknesses of the Parties’ positions, including the impacts of Viking River Cruises, Inc. v. Moriana, et al. on PAGA cases, the risks and delays of further litigation, the risks to the Parties of proceeding with trial, impacts of arbitration, off-the-clock theory, wage-and-hour enforcement, and arbitration agreements, the evidence produced and analyzed, and the possibility of bifurcation of discovery; after almost a year of negotiations, the Parties reached a settlement.” (Ghavimi Decl., ¶¶ 9-12.)

“Seventy-five percent (75%) of the Net PAGA Settlement Amount (or approximately $29,625.00) will be distributed to the LWDA (i.e., “LWDA Payment”) and twenty-five percent (25%) of the Net PAGA Settlement Amount (i.e., “Individual Settlement Payment”) will be distributed to the PAGA Members on a pro rata basis, based on their proportionate share of the pay periods worked by PAGA Settlement Members in California during the PAGA Period.” (PAGA Motion, p. 4:25--5:3; Ghavimi Decl., ¶ 13, Ex. A, section I., subsections F., H., M., O, sections VI and VIII.).

Defendants suggest that “[b]ut for settlement, the representative action may be subject to dismissal in the wake of Viking” and that the aggrieved employees and the State of California could recover nothing following years of litigation. (PAGA Motion, p. 10:13-15.) Defendants various defense theories were debated in detail during settlement negotiations. (Ghavimi Decl., ¶¶ 14-17.)

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.)

4. Reversion of Funds

The Settlement Agreement returns unclaimed funds to the State of California.

“For each Individual Settlement Payment that is returned as undeliverable, within five (5) calendar days, the Settlement Administrator will promptly attempt to locate an alternate, updated address for the PAGA Settlement Member at issue, by using the best technology accessible (e.g., skip tracing, address verification, etc.) and will attempt one (1) re-mailing of the Individual Settlement Payment. Individual Settlement Payment checks will remain valid and negotiable for one hundred and eighty (180) calendar days and will thereafter be cancelled. Funds associated with such cancelled checks will be distributed to the Controller of the State of California to be held pursuant to the Unclaimed Property Law, California Civil Code § 1500 et seq, for the benefit of those PAGA Members who did not cash their checks until such time that they claim their property.” (PAGA Motion, p. 5:4-13; Ghavimi Decl., ¶ 13, Ex. A., section IX., subsection H.).

The Court agrees that these funds should revert to the State, and not to the employer.

5. PAGA Settlement Administrator Costs

Chambers requests that the Court approve Phoenix Settlement Administrators (“Phoenix”) as the Settlement Administrator and award up to $3,750.00 to the Settlement Administrator for Settlement Administration Costs. (PAGA Motion, p. ii:18-19, ii:28—iii:3.) Phoenix attests that it “has adequate procedure in place to safeguard the data and funds to be entrusted to it. PSA’s Technology and Banking groups are directly involved with Management on all issues of Information Security and Settlement Fund transfer, as it pertains to the continuance of business processes, and all risk, vulnerability, security, and assessments as it pertains to information. The group, along with internal systems in place, monitor and communicate with Management on a Preventative and comprehensive level, in order to prevent potential Strategic or Compliance Risks. All processing of confidential and personal information is handled and maintained within the organization and therefore all data received is kept within a strict chain of custody internally.” (Lawrence Decl., ¶ 11.)

Phoenix attests further that having “factored in the hard and hourly cost, the settlement administration for this project has a will not exceed fee of $3,750.” (Lawrence Decl., ¶ 13, Ex. B.)

The Court finds that the costs in the amount of $3,750.00 is reasonable for the PAGA Settlement Administrator, Phoenix Settlement Administrators.

6. Attorney Fees and Costs

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

Chambers’ counsel attests that he “began work on this case on May 24, 2020. Prior to commencing this lawsuit, I investigated the factual and legal issues, Defendants’ business, and its operations and employment policies, practices, and procedures. During the litigation, I interviewed and obtained information from Plaintiff, reviewed and analyzed her wage statements, time sheets and the employee handbook, reviewed sample payroll records from representative class, conducted legal research, drafted, revised and evaluated PAGA penalty models in excel, met and conferred with Defendants’ counsel over issues relating to the pleadings, discovery, and settlement, prepared for and attended hearings, drafted, reviewed, and revised pleadings, and engaged in extensive settlement negotiations. I estimate I spent 75 hours prosecuting this action.” (Ghavimi Decl., ¶ 18.) Chambers’ counsel “advanced $1,793.82 in litigation costs on this PAGA matter to date.” (Ghavimi Decl., ¶ 19.) Under the Settlement Agreement, Chambers' counsel would receive attorney's fees not to exceed thirty-six percent of the PAGA Settlement Amount, or $27,000.00. (Ghavimi Decl., ¶ 13, Ex. A, § I., subsections B.) Reimbursed costs are not to exceed $3,500.00. (Id.)

The Court does not find evidence of Chambers’ counsel’s customary billing rate, educational background, or experience with PAGA litigation. The Court does not have sufficient evidence to determine that Chambers’ counsel has demonstrated that the attorney’s fees and litigation costs are reasonable.

7. Notice of Release of Claims

The parties have not provided the Court with their proposed Notice of Release of Claims.

For guidance to the parties in preparing the notice of settlement, this Court has normally required that the Notice of PAGA Settlement clearly state – usually in bold letters or in a boxed format – that by cashing the check, the aggrieved employee is not giving up any right to sue for any alleged grievances that the employee has against the employer.

8. Conclusion

It appears to the Court that the parties have not served the proposed settlement on the LWDA. Further, the Court finds insufficient evidence to determine if the entire settlement is fair, reasonable, and adequate for those concerned. The application to approve PAGA settlement is DENIED without prejudice.

III. CONCLUSION

Plaintiff Ebonee Chambers’ Motion for Approval of Settlement of Claims Brought under the Private Attorneys General Act and Reasonable Attorney Fees and Costs is DENIED without prejudice.