Judge: Stuart M. Rice, Case: 22STCV16432, Date: 2025-03-12 Tentative Ruling

Case Number: 22STCV16432    Hearing Date: March 12, 2025    Dept: 1

Moving Party:             Plaintiff Rene Umana

Ruling:                        Motion to approve PAGA settlement will be granted with the award of attorney fees reduced to $ 90,000.00 (one-third of the gross recovery). A revised order/judgment and proper dismissal of the class claims must be filed for the Court to enter an order and judgment granting approval of the PAGA settlement. A non-appearance review re distribution of settlement funds will be set for March 12, 2026 and should be included in the revised order.

Plaintiff Rene Umana (Plaintiff) requests approval of a Private Attorney General Act (PAGA) settlement between herself and defendant Columbus Technologies & Services, Inc. (Defendant).  Plaintiff’s operative First Amended Complaint alleges claims for PAGA penalties arising from violations of Labor Code Sections 201, 202, 203, 204, 226, 226.7, 510, 512, 1174, 1194, 1197, 1197.1, and 1198.

Legal Standards

Under Labor Code section 2699(l)(2): “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(l)(2); see Williams v. Superior Court (2017) 3 Cal.5th 531, 549 [noting in passing that “PAGA settlements are subject to trial court review and approval, ensuring that any negotiated resolution is fair to those affected.”)  However, “[t]he standards for review [for court approval of a representative PAGA action settlement] are unclear, however, because the trial court does not have a fiduciary responsibility to any absent class members as it does in reviewing class action settlements.”  (The Rutter Group, Cal. Prac. Guide Civ. Proc. Before Trial, Ch. 14-D, ¶12:250; see also Haralson v. U.S. Aviation Services Corp. (N.D. Cal. 2019) 383 F.Supp.3d 959, 971 [“[N]either the California legislature, nor the California Supreme Court, nor the California Courts of Appeal, nor the [Labor and Workforce Development Agency (the “LWDA”)] has provided any definitive answer as to what the appropriate standard is for approval of a PAGA settlement.”].)  A court may exercise its discretion to approve a settlement of a suit that includes a PAGA claim even if no portion of the settlement is allocated toward payment to the LWDA. (See Nordstrom Com. Cases (2010) 186 Cal.App.4th 576, 589.)   

Given that California case authority on the issue is somewhat sparse, the Court looks to a federal district court case, Haralson v. U.S. Aviation Services Corp. (N.D. Cal. 2019) 383 F.Supp.3d 959, for guidance on court approval of PAGA settlements.  In Haralson, the court noted that the rationale behind the statute’s court approval requirement is that settlement of PAGA claims compromises a claim that could otherwise be brought by the state.  (See Haralson, supra, 383 F.Supp.3d at 971.)  The court noted that the LWDA has provided the following guidance:  “It is thus important that when a PAGA claim is settled, the relief provided for under the PAGA be genuine and meaningful, consistent with the underlying purpose of the statute to benefit the public and, in the context of a class action, the court evaluate whether the settlement meets the standards of being ‘fundamentally fair, reasonable, and adequate’ with reference to the public policies underlying the PAGA.  (Haralson, supra, 383 F.Supp.3d at 971.) 

The courts have also considered payment of civil penalties as a factor in approval of PAGA settlements.  (See Flores v. Starwood Hotels & Resorts Worldwide, Inc. (C.D. Cal. 2017) 253 F.Supp.3d 1074, 1077 [federal district court approved PAGA settlement where court was satisfied that the parties' settlement was “fair and adequate in view of the purposes and policies of the statute” and the parties “adequately divvied up the civil penalties under Section 2699(i) of the California Labor Code.”].)  However, payment of civil penalties is not dispositive.  (See Nordstrom Com. Cases, supra, at 589.)  

Discussion

The proposed settlement is for a gross amount of $270,000, divided as follows:

1.      Notice to the LWDA

Labor Code section 2699(l)(2) requires that the settlement be provided to the Labor Workforce Development Agency (LWDA) at the same time it is presented to the court.  Plaintiff provided notice to the LWDA of the settlement on November 25, 2024.  (Genish Decl., ¶ 23.) 

2.      Fairness of the Settlement

a.      Presumption of Fairness

Under Dunk v. Ford Motor Co. (1996) 48 Cal.App.4^th 1794, a presumption of fairness exists where “(1) the settlement is reached through 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.”  (Id. at 1802.) 

Prior to settlement, Plaintiff obtained discovery on Plaintiff and other aggrieved employees, including a sampling of employee records, handbooks, and Defendant’s arbitration agreement.  The parties conducted a mediation with Eve Wagner, where they reached the settlement.  There have been no objections received.  The settlement is therefore presumptively fair. 

b.      Breadth of Release

The release in the settlement agreement applicable to aggrieved employees reads:

5.2 Release by Aggrieved Employees. All Aggrieved Employees are deemed to release, on behalf of themselves and their respective former and present agents, heirs, successors, and assigns, the Released Parties from all claims arising during the PAGA Period for PAGA penalties that were alleged, or reasonably could have been alleged, based on the facts stated in the Operative Complaint and the PAGA Notice.
(Genish Decl., Ex. 3, ¶ 5.2.)

This release is appropriately narrow to include only claims under PAGA, and only those based on facts in the LWDA notice and the FAC, which bound the scope of this litigation. 

c.       Amount of Attorney Fees and Costs

The settlement provides for $108,000 in attorney fees, 40% of the gross settlement amount.  Typically, the Court awards no more than one-third of the gross settlement amount in attorney fees, absent extraordinary circumstances.  This case does not meet that criterion.  Counsel drafted and filed two complaints, opposed a motion to compel arbitration, conducted informal discovery, and attended mediation, where the matter settled on a PAGA basis only.  The Court will award no more than $90,000, with the remaining $18,000 to be allocated to the net settlement amount and divided between the LWDA and aggrieved employees as provided by law.

Plaintiff requests litigation costs in the amount of $18,185.78.  These appear to have been reasonably incurred and reasonable in amount (see Genish Decl., Ex. 4) and will be awarded.

d.      Gross Settlement Amount

The $270,000 settlement represents penalties for 6,618 pay periods worked by 353 employees.  This is just over $40 per pay period and roughly $764 per employee.  The Court is satisfied that the gross settlement amount is fair and reasonable under the circumstances. 

e.       Division of Civil Penalties

“[C]ivil 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.”  (Labor Code § 2699(i).)

The amount of civil penalties is properly divided between the LWDA and aggrieved employees as the law requires.

f.        Funding of Settlement

The amended settlement will be funded through a lump sum within 14 days of the effective date, which will be the date the Court’s order and judgment on the settlement becomes final.  (See Genish Decl., Ex. 3, ¶¶ 1.9, 4.3.)

g.      Service Award

Plaintiff requests a service award of $5,000.  This is reasonable in amount considering the length of this case and the work by Plaintiff and will be approved.

3.      Dismissal of Class Claims

This action remains a class action, and no dismissal of the class claims has been requested under Cal. Rules of Court, rule 3.770.  The Court cannot enter judgment on a PAGA settlement while the class claims remain at issue. 

Conclusion

The motion for approval is granted subject to the conditions set forth above.