Judge: Monica Bachner, Case: 21STCV01648, Date: 2022-09-02 Tentative Ruling

Case Number: 21STCV01648    Hearing Date: September 2, 2022    Dept: 71

Superior Court of California

County of Los Angeles

DEPARTMENT 71

TENTATIVE RULING

Plaintiffs’ motion for an order approving the settlement pursuant to Labor Code section 2698 et seq. is continued to September 16, 2022 at 9:30 a.m.

Plaintiffs are ordered to provide the Court with the following 5 court days before the continued hearing on the motion:

1.    Individual Settlement Agreement(s) that were incorporated by reference in this Settlement Agreement.

2.    A modified Notice of Settlement Agreement including notice to unnamed Plaintiffs of the effect of the Individual Settlement Agreement(s) on their recovery.

           Plaintiffs John Coles, Michelle Langa, and the allegedly aggrieved employees under the Labor Code’s Private Attorneys General Act of 2004 (PAGA) move for an order approving their August 9, 2022, Private Attorneys General Act Claims Settlement Agreement with Defendants Sally Beauty Holdings, Inc.; Sally Beauty Supply, LLC.; and Beauty Systems Group, LLC.  (Lo Decl.; Ex. D [Settlement].)

           Motion to Approve PAGA Settlement

Plaintiffs request the Court issue an order: (1) granting approval of the parties’ proposed settlement; (2) appointing CPT Group Class Action Administrators as the third-party settlement administrator and approving an award of up to $6,750 from the Settlement Sum; (3) directing distribution of Settlement Sum pursuant to the Settlement’s terms; (4) directing payment from the Settlement Sum for Plaintiffs’ Counsel’s attorneys’ fees not to exceed $24,750 and litigation costs of $9,898.73; and (5) dismissing this action without prejudice.  (Proposed Order, p. 2.)  The proposed total settlement is for $75,000, with $34,750 for the payment of Plaintiff’s Counsel’s fees and costs ($24,750 in fees and up to $10,000.00 in costs) and the costs of administration (up to $6,750.00) subtracted from the $75,000 Settlement Sum, yielding approximately $33,500.00. Seventy-five percent (75%) of this amount, or $25,125, shall be distributed to the LWDA, and the remaining twenty-five percent (25%) or $8,375, shall be distributed to the Aggrieved Employees. (Settlement Agreement, pg. 1, 6.)

Labor Code section 2699(l)(2) provides that “[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 [Labor & Workforce Development Agency (“LWDA”)] at the same time that it is submitted to the court.” 

As a threshold matter, Plaintiffs submitted evidence the parties complied with Labor Code section 2699(l)(2) by submitting a copy of the Settlement and instant motion to the LWDA at the same time they were submitted to the Court on August 11, 2022. (Lo Decl. ¶ 11, Ex. C.)   

On January 14, 2021, Coles filed the initial complaint in the instant action alleging a single PAGA cause of action for civil penalties pursuant to Labor Code section 2698, et seq.  (Compl. ¶¶ 29–35.)  On July 26, 2022, Plaintiffs filed their First Amended Complaint (FAC), adding Langa as a named Plaintiff.  (First Am. Compl.; Stipulation Order Allow Pl. File First. Am. Compl., pg. 2.)  On October 8, 2020, Coles gave the LWDA and Defendants written notice of Defendants’ alleged Labor Code violations.  (First Am. Compl. ¶ 17, Ex. A.)  Coles alleges the LWDA did not respond to this notice within sixty-five (65) days.  (First Am. Compl. ¶ 18.)  On March 29, 2022, Langa gave the LWDA and Defendants written notice of Defendants’ alleged Labor Code violations.  (First Am. Compl. ¶ 19, Ex. A.)  Langa alleges the LWDA did not respond to this notice within sixty-five (65) days.  (First Am. Compl. ¶ 20.)  On March 21, 2021, and July 29, 2022, Defendants filed answers denying all liability.  (Answer, pg. 2; Answer First Am. Compl., pg. 2.)

On August 11, 2022, Plaintiffs filed the instant motion and supporting documents indicating the parties reached a settlement while participating in the June 1, 2022, Mediation with mediator Lisa Klerman, Esq.  (Lo Decl. ¶ 15.)

The Settlement defines “Aggrieved Employees” as all individuals who worked for Defendants in California as Distributor Sales Consultants, in commissioned sales positions, and/or in similar job positions, whether exempt, salaried, hourly, and/or non-exempt, at any time during the Release Period.  (Settlement, pg. 1.) The Settlement defines “Release Period” as October 8, 2019, through the Effective Date, which is defined as the date this Court enters an order and judgment approving and incorporating by reference the terms and conditions of the submitted Settlement Agreement. (Settlement, pg. 2.)  The definitions are proper pursuant to the statute of limitations and the date of notice on the LWDA. 

The Settlement defines “Released Claims” as any and all claims, rights, demands, liabilities, causes of action, and primary rights of every nature and description that were alleged or could have been alleged based on the allegations set forth in the PAGA Letters and instant action. (Settlement, pg. 8.)  As such, the Settlement provides that Released Claims only include claims for civil penalties under PAGA.  The Settlement defines “Released Parties” as Defendants and each of their present and former affiliates, parent companies, subsidiaries, divisions, successors, assigns, representatives, accountants, and all persons acting under, by, through, or in concert with any of them.  (Settlement, pg. 8.)

The terms of the Settlement’s release imply that only in exchange for the consideration set forth in the Settlement (i.e., the individual PAGA payments) do PAGA Settlement Members release Released Parties from Released Claims.  As such, the release is accordingly effective after the payment date, which is proper.   (See Settlement, pg. 5.)

The Settlement provides that within thirty (30) business days after the Effective Date or fourteen (14) business days of the Settlement Administrator establishing a qualified settlement fund (QSF) pursuant to the Settlement Agreement, Defendants shall pay the entire PAGA Settlement Sum into the QSF.  (Settlement Agreement, pg. 6.)  Payment shall be made via wire, bank transfer, or other means acceptable to the Settlement Administrator on or before the scheduled due date. (Settlement Agreement, pg. 6.)

The Settlement provides that no later than fifteen (15) business days after Defendants’ deposit of the PAGA Settlement Fund into the QSF, the Settlement Administrator shall disburse court-approved amounts from the PAGA Settlement sum to Aggrieved Employees, the LDWA, Plaintiffs’ Counsel, and itself.  (Settlement Agreement, pg. 6.)  The Settlement Administrator shall transmit the “Notice of PAGA Settlement” together with settlement checks containing their individual settlement amounts with no claims process required, to all Aggrieved Employees by first class United States mail, postage prepaid, to the last known address of each recipient with directions to the Postmaster to forward the Notice of PAGA Settlement and return those letters that are undeliverable to the Settlement Administrator.  (Settlement Agreement, pg. 6.) Prior to mailing, the Settlement Administrator will perform a search based on the National Change of Address Database for information to update and correct for any known or identifiable address changes.  (Settlement Agreement, pg. 6.)  Any checks returned as non-deliverable on or before the check-cashing deadline will be sent promptly via regular first-class U.S. mail to the forwarding address affixed thereto. (Settlement Agreement, pg. 7.) If no forwarding address is provided, the Settlement Administrator will promptly attempt to determine the correct address using a skip-trace or other search using the name, address, or Social Security number of the Aggrieved Employee involved and then perform a single remailing. (Settlement Agreement, pg. 7.)  Checks will remain negotiable for 180 days after their issuance; after the 180 day-period, the Settlement Administrator shall remit any unclaimed funds to the California State Controller as unclaimed property in the name of each such Aggrieved Employee. (Settlement Agreement, pg. 7.)

The Settlement does not cover any non-PAGA claims as Plaintiffs only asserted a PAGA claim.  As such, the Release does not apply to any individual claims, and the release is proper.  (Settlement Agreement, pg. 5; see ZB, N.A. v. Superior Court (2019) 8 Cal.5th 175.) 

A superior court must review and approve any penalties sought as part of a proposed settlement agreement pursuant to Labor Code section 2699(l).  “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(f)(2).)  A prevailing employee is entitled to an award of reasonable attorney fees and costs incurred in the action (Lab. Code § 2699(g)(1).)  “[C]ivil penalties recovered by aggrieved employees shall be distributed as follows: 75 percent to the [LWDA] for enforcement of labor laws and 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 [LWDA] for those purposes; and 25 percent to the aggrieved employees.”  (Lab. Code § 2699(i).) 

Plaintiffs provided the Court with insufficient information to approve the Settlement, as discussed below.

Plaintiffs provided the Court with the Settlement, Plaintiffs’ Notice Letter and Amended Notice Letter sent to the LWDA, and information regarding how the terms of the settlement were reached. (Lo Decl. ¶¶ 6, 15–19; Ex. D [Settlement], Ex. B [Notice Letters].)  Plaintiffs provided information relating to the investigation done by their counsel.  (Lo Decl. ¶¶ 12–14.)  Plaintiff also provided information suggesting the Settlement is reasonable based on Plaintiffs’ counsels’ investigation and the range of recovery.  (Lo Decl. ¶¶ 12–14, 16–19.) Plaintiffs provided sufficient information to support the reasonableness of the Settlement. 

Plaintiffs provide the total amount of the settlement and the manner of its distribution.  (Settlement, pg. 1, 6.)  The Settlement also sets forth the tax treatment of all settlement payments.  (Settlement, pg. 7.) 

As discussed above, to the extent the release of claims for PAGA penalties is based only on underlying allegations in this action, and as such it only releases claims alleged in the Notice Letters sent to the LWDA, the release does not release anything other than claims for penalties, and there is no Civil Code section 1542 waiver, and as such, the release is proper.  (Settlement, pg. 8.) 

The submitted PAGA Settlement Agreement incorporates by reference a separate Individual Settlement Agreement on multiple occasions that was not attached to this filing. (Settlement, pg. 5, 9.) The court requests the parties submit the Individual Settlement Agreement(s) to provide the court a more comprehensive understanding of all settlement agreements between the parties.

The Settlement provides that the designated Administrator will be responsible for settlement administration and that the individual payment amounts for PAGA Settlement Members are to be determined based on the number of applicable pay periods worked by each employee during the Covered Period according to Defendants’ records.  (Settlement, pg. 6.)  The Settlement provides that PAGA Settlement Members will receive an explanatory letter of the instant Settlement along with their payment checks, which is attached as Exhibit A to the Settlement as Notice of Settlement.  (Settlement, pg. 14, Ex. A.)  The Settlement properly provides that checks that remain uncashed after 180 days will be forwarded to the California State Controller’s Office Unclaimed Property Fund in the name of the Aggrieved Employee.  (Settlement, pg. 15, Ex. A.)  However, the Court finds that because this Settlement Notice does not include information about the Individual Settlement Agreement(s) the Settlement Notice does not accurately and fairly describe the Settlement.

As the prevailing employee, Plaintiffs are entitled to reasonable attorneys’ fees in this action.  (Cal. Lab. Code § 2699(g)(1).)  The PAGA Settlement provides for attorneys’ fees.  (Settlement, pg. 8.)  Plaintiffs’ Counsel requests $24,750 in fees, which is much less than the $56,335 attorneys billed on the attached invoice.  (Mem. P. & A. pg. 7; Settlement, Ex. G.)  Plaintiffs submitted support in the form of a list of tasks performed by attorneys. (Settlement, Ex. G.) Counsel Lo also provides his and Counsel Alemzadeh’s hourly rates of $550 per hour and $500 per hour, respectively. (Lo Decl. ¶ 29.) The Court finds the attorneys’ fees award is sufficiently supported.

The Settlement also provides for an award of costs incurred.  (Settlement, pg. 10.)  Plaintiff provided sufficient support demonstrating Plaintiffs’ counsel incurred costs for $9,898.73, including invoices supporting the incurred costs. (Lo Decl. ¶ 27, Ex. E.)  The Court finds the requested costs are reasonable and supported.  

The Settlement indicates that the upon approval of the Settlement, the Court shall approve a Judgment. (Settlement, pg. 5; Proposed Order, Ex. A.)  The Settlement and [Proposed] Judgment submitted by the parties provides for a final judgment with the Court retaining jurisdiction pursuant to C.C.P. section 664.6.  (Proposed Order ¶¶ 7–8; Settlement, p. 10.)

Based on the foregoing, Plaintiffs’ motion for an order approving the Settlement is continued.    

Dated:  September _____, 2022

Hon. Monica Bachner

Judge of the Superior Court