Judge: Michelle Williams Court, Case: 20STCV22528, Date: 2022-10-03 Tentative Ruling

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Case Number: 20STCV22528    Hearing Date: October 3, 2022    Dept: 74

20STCV22528           ROSALIE WAYMAN vs TERRY YORK MOTOR CARS

Plaintiffs’ Motion and Motion for Approval of Settlement of Claims Brought under the Private Attorneys’ General Act and Reasonable Attorneys’ Fees, Costs, and Enhancement Payments

TENTATIVE RULING:  The motion is GRANTED in part.  The Court shall not approve the enhancement payments, which consist of $5,000.00 to each of the three Plaintiffs. Plaintiffs must provide a revised judgment that removes the enhancement payments and corrects the affected terms of the settlement consistent with adding $15,000.00 to the Net Settlement Amount. The Court otherwise approves the settlement.

Background

On June 15, 2020, Plaintiff Rosalie Wayman filed this action against Terry York Motor Cars, LTD asserting a single cause of action under PAGA.

On May 11, 2022, the Court acknowledged the parties’ settlement and on July 7, 2022, the Court entered the parties’ stipulated order for leave to file a First Amended Complaint.

On July 19, 2022, Plaintiff filed the First Amended Complaint, which added Riham Magaly and Sultan Ahmad as additional Plaintiffs and over 50 new Defendants.

Motion to Approve PAGA Settlement

On August 8, 2022, Plaintiffs filed their motion to approve their PAGA settlement reached in this action.  

The motion is unopposed.

Request for Judicial Notice and Improper Citation to Superior Court Orders

Plaintiffs request the Court take judicial notice of various Superior Court rulings approving PAGA settlements. Plaintiffs’ reliance upon, and citation to, Superior Court orders is improper. The request is DENIED. (See City of Bakersfield v. West Park Home Owners Assn. & Friends (2016) 4 Cal.App.5th 1199, 1210 (“the City relies on similar financing plans having been validated by at least eight California trial courts. The City requests this court to take judicial notice of these trial court orders. However, trial court orders hold no precedential value. Accordingly, we will neither rely upon, nor take judicial notice of, these orders.”) (internal citation omitted); Aguirre v. Amscan Holdings, Inc. (2015) 234 Cal.App.4th 1290, 1299 n.5 (“Rule 8.1115 of the California Rules of Court prohibits the citation of unpublished opinions of California state courts, with certain limited exceptions. (Cal. Rules of Court, rule 8.1115(a).) We shall disregard the unpublished superior court opinions cited and relied upon by plaintiff.”).)

Discussion

Standard

Pursuant to Labor Code section 2699(l)(2), “[t]he 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.” The purpose of this requirement is to “ensur[e] that any negotiated resolution is fair to those affected.” (Williams v. Superior Court (2017) 3 Cal.5th 531, 549.) “Aside from the requirement that the court ‘review and approve’ a settlement in a civil action filed under PAGA (§ 2699, subd. (l)(2)), PAGA itself does not provide a standard for this review.” (Moniz v. Adecco USA, Inc. (2021) 72 Cal.App.5th 56, 75.) “[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.” (Id. at 77.)

“A PAGA representative action is therefore a type of qui tam action.” (Iskanian v. CLS Transportation Los Angeles, LLC (2014) 59 Cal.4th 348, 382 abrogated on other grounds by Viking River Cruises, Inc. v. Moriana (2022) 142 S.Ct. 1906.) Approval of a qui tam action generally requires a court determination “that the proposed settlement is fair, adequate, and reasonable under all of the circumstances.” (Gov. Code § 12652(e)(2)(B).) “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. Given PAGA's purpose to protect the public interest, we also agree with the LWDA and federal district courts that have found it appropriate to review a PAGA settlement to ascertain whether a settlement is fair in view of PAGA's purposes and policies.” (Moniz, supra, 72 Cal.App.5th at 77.)

Terms of the Settlement

The parties agreed to a gross settlement of $1,209,274.00, which includes an enhancement payment of $5,000.00 for each of the three Plaintiffs, attorneys’ fees of $403,091.33, litigation costs of $17,555.37, $21,950.00 for the Settlement Administrator, and a Net Settlement Amount of $751,677.33 to be distributed between the LWDA and the aggrieved employees. (Haines Decl. Ex. 5, “Settlement Agreement” § III ¶¶ 2, 4.)

The settlement is properly non-reversionary. (Id. § III ¶ 4.) The “PAGA Period” is defined as November 15, 2019 through June 30, 2022. (Settlement Agreement § I ¶ 12.) The release provided by the aggrieved employees is appropriately narrow to solely encompass claims for PAGA penalties that could have been asserted in this action. (Id. § I ¶ 13.)

The settlement includes the required distribution of Net Settlement Amount: 75% to the LWDA, ($563,758.00), and 25% to the aggrieved employees ($187,919.33). (Id. § III ¶ 5; Labor Code § 2699(i).) There are approximately 6,366 aggrieved employees and 219,868 pay periods worked during the PAGA period. (Haines Decl. ¶¶ 17, 24.) Aggrieved employees will be paid on pro rata based upon the number of pay periods worked, resulting in average payments of $29.52 per employee. (Settlement Agreement § III ¶ 5, Haines Decl. ¶ 17.)

The Court Shall Not Approve Enhancement Payments

The Settlement Agreement includes $5,000.00 for each Plaintiff as an Enhancement Payment “for serving as the representative plaintiffs in this Action.” (Settlement Agreement § III ¶ 4(b).)

Plaintiffs contend “[c]ourts routinely approve service awards to compensate named plaintiffs for the services they provide and the risks they incur during representative litigation.” (Opp. at 20:25-21:1.) However, the only cited authority, other than improperly cited and non-binding Superior Court rulings, involved class action litigation, not PAGA actions. (Ibid. citing Bell v. Farmers Ins. Exchange (2004) 115 Cal.App.4th 715 and Van Vranken v. Atlantic Richfield Co. (N.D. Cal. 1995) 901 F.Supp. 294. See generally Huff v. Securitas Security Services USA, Inc. (2018) 23 Cal.App.5th 745, 757 (“a representative action under PAGA is not a class action.”).)

“[A]n action to recover civil penalties is fundamentally a law enforcement action designed to protect the public and not to benefit private parties.” (Iskanian, supra, 59 Cal.4th at 381.) This Court interprets Labor Code § 2699(i) to prohibit incentive payments or service awards to named aggrieved employees in PAGA actions.

Labor Code section 2699(i) provides that  “[e]xcept 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.” Subdivision (j), in turn, provides that “[c]ivil penalties recovered under paragraph (1) of subdivision (f) shall be distributed 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.”

Nothing within the PAGA statutory framework permits recovery of an enhancement payment. To the contrary, the statute specifically instructs how the civil penalties “shall” be distributed. The ordinary meaning of “shall” is of mandatory effect, while the ordinary meaning of “may” is purely permissive in character. (See Labor Code § 14.) Thus, the use of “shall” setting forth a specific procedure that a party is to follow supports the construction that the procedure is mandatory rather than permissive. (See generally In re Ins. Installment Fee Cases (2013) 211 Cal.App.4th 1395, 1430.)

As summarized by the court in Provost v. YourMechanic, Inc. (2020) 55 Cal.App.5th 982, 991, “[t]he Legislature provided two financial incentives for aggrieved employees to pursue the recovery of civil penalties under PAGA. First, when a civil penalty is recovered under PAGA, 75 percent goes to LWDA and the remaining 25 percent goes to the aggrieved employees. [Citation] Second, any employee who prevails in an action is entitled to his or her reasonable attorney fees and costs. [Citation].” Further incentive in the form of an enhancement payment is neither permitted nor warranted.

The settlement provides “[i]n the event the Court approves a payment of less than the requested amount, the difference will be added to the Net Settlement Amount.” (Settlement Agreement § III ¶ 4(b).) Accordingly, Plaintiffs must provide a revised judgment that removes the enhancement payments and corrects the affected terms of the settlement consistent with adding $15,000.00 to the Net Settlement Amount.

The Total Settlement Amount is Fair, Reasonable, and Adequate Under the Circumstances of the Case

Plaintiff Rosalie Wayman initially filed this action against Defendant Terry York Motor Cars, LTD only. On February 4, 2021, Plaintiff Riham Megally filed a separate PAGA only action against Defendant Carwell, LLC, dba Mercedes-Benz of South Bay, in Los Angeles Superior Court Case No. 21STCV04424.  (Haines Decl. ¶ 13.) On September 1, 2021, Plaintiff Sultan Ahmad filed another PAGA only action against Defendants Bargain Rent-A-Car dba Lexus of Cerritos and Autonation, Inc. in Los Angeles Superior Court Case No. 21STCV41319. (Id. ¶ 14.)

As part of the parties’ settlement, Plaintiff Wayman permitted Plaintiffs Megally and Ahmad to join this action via the First Amended Complaint that included the claims asserted by Ahmad and Megally in the prior proceeding and added related entities as Defendants.

The parties reached the proposed settlement after two mediation sessions with an experienced wage and hour mediator. (Haines Decl. ¶¶ 15-16.) Defendants produced payroll and timekeeping records for Plaintiffs and a representative sample of the aggrieved employees, as well as relevant policy documents as part of the mediation process. (Id. ¶ 15.) The parties debated the effect of the Supreme Court’s ruling in Viking River Cruises, which provided a possible basis to compel Plaintiffs to individual arbitration, as well as the potential merits of Defendants’ other defenses. (Id. ¶¶ 18-23.) Plaintiffs calculated the maximum total PAGA exposure to be $21,986,800.00 based upon the available data. (Id. ¶ 24.)

The Court finds the $1,209,274.00 settlement is fair, reasonable, and adequate in light of Plaintiffs’ PAGA claims, Defendant’s potential defenses, possible reductions in any eventual PAGA award, and the posture of this case. (See Kullar v. Foot Locker Retail, Inc. (2008) 168 Cal.App.4th 116, 130 (“The most important factor is the strength of the case for plaintiffs on the merits, balanced against the amount offered in settlement.”).) The $1,209,274.00 settlement provides genuine and meaningful relief consistent with the purpose of PAGA. (Moniz, supra, 72 Cal.App.5th at 77 (“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.”).)

Plaintiffs request attorneys’ fees in the amount of $403,091.33, or one-third of the Gross Settlement, and $17,555.57 in costs. The fees and costs are supported by the declaration of attorneys Paul Haines and James Hawkins, who indicate Plaintiffs’ lodestar attorneys’ fees are $206,307.50. (Haines Decl. ¶¶ 25-29, Ex. 6-7, Hawkins Decl. ¶¶ 6, 8, Ex. 1.) Thus, the total requested percentage fee would result in a lodestar multiplier of 1.95. The proposed fees and costs are acceptable under the common fund doctrine and are not disproportionate to an appropriate lodestar enhancement. (See Consumer Privacy Cases (2009) 175 Cal.App.4th 545, 557; Laffitte v. Robert Half Internat. Inc. (2016) 1 Cal.5th 480, 503.) Considering the work completed by Plaintiffs’ counsel to bring about this PAGA settlement, (e.g., legal research, discovery, damages analysis, mediation, etc.), the results obtained, and the contingent nature of the representation, the Court finds that the fees and costs claimed are reasonable. The motion is accompanied by the declaration of Jodey Lawrence of Phoenix Settlement Administrators, which adequately supports the claimed administration fees. (Lawrence Decl. ¶¶ 2-17, Ex. B.)