Judge: Teresa A. Beaudet, Case: 21STCV03190, Date: 2022-08-12 Tentative Ruling

Case Number: 21STCV03190    Hearing Date: August 12, 2022    Dept: 50

Superior Court of California

County of Los Angeles

Department 50

Background

Plaintiff Lourdes Mejias, on behalf of herself and all persons similarly situated (“Plaintiff”) filed this action on January 26, 2021 against Defendant Agile Sourcing Partners, Inc. (“Defendant”). The Complaint asserts causes of action for (1) penalties pursuant to Labor Code § 2699, et seq. for violations of Labor Code §§ 201-203 and 432.5, (2) Unfair Competition Law violations, (3) violation of the Federal Credit Reporting Act, and (4) violation of the Investigative Consumer Reporting Agencies, Act.

Plaintiff moves for preliminary approval of a proposed class action settlement in this action. The motion is unopposed.  

Discussion

            Preliminary Approval of Class Action Settlement

As a “fiduciary” for the absent class members, “the trial court’s duty [is] to have before it sufficient information to determine if the settlement [is] fair, adequate, and reasonable.” (7-Eleven Owners for Fair Franchising v. Southland Corp. (2000) 85 Cal.App.4th 1135, 1151, citing Dunk v. Ford Motor Co. (1996) 48 Cal.App.4th 1794, 1802.)

California Rules of Court, rule 3.769 governs settlements of class actions. “Any party to a settlement agreement may serve and file a written notice of motion for preliminary approval of the settlement. The settlement agreement and proposed notice to class members must be filed with the motion, and the proposed order must be lodged with the motion.” (Cal. Rules of Court, rule 3.769(c).) As an initial matter, the Court notes that no proposed order was lodged with the motion. In addition, a proposed notice to class members does not appear to have been filed.  

            Fairness of the Settlement Agreement

In an effort to aid the Court in the determination of the fairness of the settlement, Wershba v. Apple Computer, Inc. (2001) 91 Cal.App.4th 224, 244-245 (disapproved on other grounds), discusses factors that the Court should consider when testing the reasonableness of the settlement. “[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 p. 245.) “[T]he test is not the maximum amount plaintiffs might have obtained at trial on the complaint, but rather whether the settlement is reasonable under all of the circumstances.” (Id. at p. 250; see also Detroit v. Grinnell Corp. (2d Cir. 1974) 495 F.2d 448, 455 [stating that a proposed settlement that amounts to a fraction of the potential recovery does not in itself render the proposed settlement grossly inadequate].) 

In making this determination, the Court considers all relevant factors including “the strength of [the] plaintiffs’ case, the risk, expense, complexity and likely duration of further litigation, the risk of maintaining class action status through trial, the amount offered in settlement, the extent of discovery completed and the stage of the proceedings, the experience and views of counsel, the presence of a governmental participant, and the reaction of the class members to the proposed settlement.’” (Kullar v. Foot Locker Retail, Inc. (2008) 168 Cal.App.4th 116, 128, citing Dunk, supra, 48 Cal.App.4th at p. 1801.) 

Terms of the Settlement Agreement

A copy of the fully executed “Joint Stipulation of Class and Representative Action Settlement and Release” (the “Settlement Agreement”) is attached as Exhibit A to the Declaration of James M. Treglio. The Settlement Agreement is entered into by Plaintiff and Defendant.

Plaintiff notes that the parties have agreed to settle the claims of two classes. The first is the “Background Check Settlement Class,” which is defined as “[a]ll individuals who applied for employment with Defendant in California and were required to undergo a pre-hire credit check, consumer report, or investigative consumer report as part of the application process and/or signed an agreement containing a non-competition provision during the Class Period.” (Settlement Agreement, ¶ II(4).)[1] The second is the “Waiting Time Settlement Class,” which is defined as “[a]ll of Defendant’s California employees whose employment terminated during the Class Period.” (Settlement Agreement, ¶ II(42).)

Additionally, the parties have agreed to settle the claims of two PAGA representative groups. The first is the “Background Check PAGA Representative Action Members,” which is defined as “all of Defendant’s California employees who were required to undergo a pre-hire background check as part of their application of employment with Defendant and/or sign an agreement containing a non-competition provision during the PAGA period.” (Settlement Agreement, ¶ II(3).)[2]  The second is the “Waiting Time PAGA Representative Action Members,” which is defined as “all of Defendant’s California employees whose employment was terminated during the PAGA Period.” (Settlement Agreement, ¶ II(41).)    

Plaintiff submits that the Court should conditionally certify the proposed classes for purposes of settlement only because the proposed classes meet all requirements for class certification under Code of Civil Procedure section 382. (See Dunk, supra, 48 Cal.App.4th at p. 1807, fn. 19 [finding that the Court may use a lesser standard to determine the appropriateness of a settlement class for settlement purposes].) In support of this argument, Plaintiff asserts that the proposed Background Check and Waiting Time Settlement Classes are ascertainable as Defendant was able to reference its business and payroll records to provide data about them, and that these classes are sufficiently numerous as they collectively consisted of approximately 76 members when the parties negotiated the settlement. (Settlement Agreement, ¶ II(9); Treglio Decl. ¶ 12.) Plaintiff asserts that common questions of law and fact predominate because Defendant’s challenged policies and practices uniformly apply to Background Check and Waiting Time Settlement Classes and the resolution of these common issues will determine Defendant’s liability to all individuals in these classes. Plaintiff asserts that her claims are typical of the Background Check and Waiting Time Settlement Classes because she and those belonging to these classes were employed and/or considered for employment by Defendant in California and were subject to the same allegedly non-compliant pre-hire and/or employment policies and procedures implemented by Defendant and applicable to them all during the Class Period. (Treglio Decl. ¶ 12.) Plaintiff asserts she will adequately represent the classes because her counsel is experienced in complex employment and class action litigation. (Treglio Decl. ¶¶ 2, 3, Ex. B.) Lastly, Plaintiff asserts that that a class action is superior to other means for the efficient adjudication of this controversy.

The Court agrees, and so the Court proceeds with the analysis of the reasonableness of the Settlement Agreement in light of the conditional certification of the Background Check and Waiting Time Settlement Classes for settlement purposes.

The Settlement Agreement provides for a Gross Settlement Amount of $40,000.00, in exchange for a release of claims, and is to be allocated as follows:

·       1/3 of the Gross Settlement Amount, or $13,333.33: attorney fees;

·       $1,000.00: Representative Service Award;

·       $3,000.00: reimbursement of costs to Class Counsel;

·       $5,000.00: Settlement Administration costs;

·       $16,000.00: PAGA penalties, of which 75% or $12,000.00 will be paid to the LWDA and the remaining 25% or $4,000.00 distributed proportionally among the Background Check PAGA Representative Action Members and the Waiting Time PAGA Representative Action Members on a per capita basis;

·       A Net Settlement Amount comprising the portion of the Gross Settlement Amount remaining after deducting the Representative Service Award, the settlement administration costs, attorney’s fees and costs, and the LWDA payment.

The Net Settlement Amount will be allocated proportionally among Participating Class Members on a per capita basis. (Settlement Agreement, ¶ III(14)(a).) “Participating Class Members” means all Background Check Settlement Class Members and all Waiting Time Settlement Class Members who do not submit a valid letter requesting to be excluded from the Settlement. (Settlement Agreement, ¶ II(27).) The Settlement Administrator will determine the amounts of any Individual Settlement Shares and individual PAGA payments. (Settlement Agreement, ¶ III(14).)

The Individual Class Settlement Shares paid to Background Check and Waiting Time Settlement Class members will be allocated 100% as 1099 payments for penalties and interest.  (Settlement Agreement, ¶ III(15)(a).) The Individual PAGA Payments made to Background Check and Waiting Time PAGA Representative Action Members will be allocated 100% as 1099 payments for penalties. (Settlement Agreement, ¶ III(15)(b).) The Settlement Administrator will be responsible for reporting payments under the Settlement Agreement to all required taxing and other authorities and issuing IRS Form 1099s. (Settlement Agreement, ¶ III(16)(a).)

Any Background Check and Waiting Time Settlement Class Members wishing to opt-out of the Released Background Check Class Claims or Released Waiting Time Class Claims portion of the Settlement must notify the Settlement Administrator in writing that they want to opt out, and the request to opt out must be postmarked no later than the Response Deadline (60 calendar days from the initial mailing of the Notice of Settlement by the Settlement Administrator, unless the 60th day falls on a Sunday or federal holiday, in which case the Response Deadline will be extended to the next day on which the U.S. Postal Service is open). (Settlement Agreement, ¶¶ II(36); III(9)(a).) Background Check and Waiting Time Settlement Class Members cannot opt out of or be excluded from participating in the settlement of the PAGA Released Background Check Claims or the PAGA Released Waiting Time Claims. (Settlement Agreement, ¶ III(9)(a).) A Background Check or Waiting Time Settlement Class Member may object to the proposed settlement of the Released Class Claims orally at the hearing on Final Approval of the proposed settlement, or in writing. (Settlement Agreement, ¶ III(10).) Written objections must be mailed to the Settlement Administrator and be postmarked on or before the Response Deadline. (Settlement Agreement, ¶ III(10).)

If a settlement check remains uncashed after 180 days from issuance, the amount of any such uncashed check(s) shall be tendered, with interest, if any, to Legal Aid at Work. (Settlement Agreement, ¶ III(18).)

Analysis of Settlement Agreement

1. Does a Presumption of Fairness Exist?
1. Was the Settlement reached through arm’s-length bargaining? Plaintiff indicates that the parties participated in arm’s-length negotiations carried out in an adversarial context.  (Treglio Decl.,  ¶¶ 4, 5.)  
2. Were investigation and discovery sufficient to allow counsel and the Court to act intelligently? The parties’ negotiations included an informal exchange of information, as well as an exposure analysis prepared by counsel for Defendant that the parties discussed. Counsel for Defendant also provided information to Plaintiff’s counsel regarding the composition and number of individuals in the proposed class and representative group. In addition, Plaintiff’s counsel conducted substantial investigation concerning the claims, defenses, and alleged damages at issue in the lawsuit. (Treglio Decl., ¶¶ 4, 5.)  
3. Is counsel experienced in similar litigation? Counsel is experienced in wage-and-hour class action litigation. (Treglio Decl., ¶¶ 2, 3, Ex. B.)   
4. What percentage of class has objected? This cannot be determined until the fairness hearing. 
2.  Is the settlement fair, adequate and reasonable?
1.  Strength of the plaintiff’s case.  The strength of the case on the merits for the plaintiff is the most important factor, balanced against the amount offered in settlement. (Kullar v. Foot Locker Retail, Inc., supra, 168 Cal.App.4th at p. 130.) Plaintiff estimated that the maximum value of the claims alleged in this lawsuit is approximately $94,100.00, excluding interest and liquidated damages. (Treglio Decl., ¶ 6.) Plaintiff indicates that Defendant raised several defenses, such that the estimation of the maximum value of the case had to be discounted, including that Plaintiff’s claims are not subject to certification, Defendant’s background check disclosure and consent forms comply with the law, and Defendant did not act willfully. (Treglio Decl., ¶ 7.) In addition, Defendant denied liability and contended that it followed all applicable laws with respect to Plaintiff’s and the Background Check and Waiting Time Settlement Class Members’ hiring and employment. (Treglio Decl., ¶ 7.) 

2.     Risk, expense, complexity and likely duration of further litigation. Plaintiff asserts that the settlement extinguishes the risks attendant to continued litigation and any appeals that would likely be filed following a class certification decision or judgment in Plaintiff’s favor. (Treglio Decl., ¶ 9.) Plaintiff asserts that such efforts in continued litigation would likely result in a delay of several years before this case could finally be resolved. (Treglio Decl., ¶ 9.) 

3.     Risk of maintaining class action status through trial. Plaintiff indicates that her estimation of the maximum value of the case had to be discounted due to (among other factors) the likelihood of prevailing on a class certification motion as well as trial. (Treglio Decl., ¶ 7.) 

4.     Amount offered in settlement. $40,000.00

5.     Extent of discovery completed and the stage of the proceedings. The parties participated in an informal exchange of information and Plaintiff conducted an investigation of the claims, defenses, and alleged damages at issue. (Treglio Decl., ¶¶ 4, 5.)

6.     Experience and views of counsel. As indicated above, counsel is experienced in class actions.

7.     Presence of a governmental participant. This factor is not applicable here.

8.     Reaction of the class members to the proposed settlement. The class members’ reactions will not be known until they receive notice and are afforded an opportunity to object or opt-out.  This factor becomes relevant during the fairness hearing.

Scope of Release

Upon the “Effective Date”[3] and except as to such rights or claims as may be created by the Settlement Agreement, each and every Participating Background Check Settlement Class Member shall release the “Released Parties”[4] from the “Released Background Check Class Claims.” (Settlement Agreement, ¶¶ III(20).) The Participating Waiting Time Settlement Class Members shall similarly release the Released Parties from the “Released Waiting Time Class Claims.” (Settlement Agreement, ¶¶ III(21).) The “Released Background Check Class Claims” and “Released Waiting Time Class Claims” are defined in paragraphs II(32) and II(34) of the Settlement Agreement, respectively.

In addition, upon the Effective Date, and except as to such rights or claims as may be created by the Settlement Agreement, each and every Background Check PAGA Representative Action Member shall release the “Released Parties” from the “PAGA Released Background Check Claims.” (Settlement Agreement, ¶¶ III(22).) The Waiting Time PAGA Representative Action Members shall similarly release the Released Parties from the “PAGA Released Waiting Time Claims.” (Settlement Agreement, ¶¶ III(23).) The “PAGA Released Background Check Claims” and the “PAGA Released Waiting Time Claims” are defined in paragraphs II(25) and II(26) of the Settlement Agreement, respectively.

The Court finds that the scope of the releases is reasonable.

Notice to Class

A.    Standard

If the court grants preliminary approval, the order must include the time, date and place of the final approval hearing; direct that notice be given to the class; and any other matters deemed necessary for the settlement hearing. (Cal. Rules of Court, rule 3.769(e).) Additionally, California Rules of Court, rule 3.769(f) states: “If the court has certified the action as a class action, notice of the final approval hearing must be given to the class members in the manner specified by the court. The notice must contain an explanation of the proposed settlement and procedures for class members to follow in filing written objections to it and in arranging to appear at the settlement hearing and state any objections to the proposed settlement.”

B.    Form of Notice

Paragraph II(22) of the Settlement Agreement indicates that a “Notice of Settlement” is attached to the Settlement Agreement as Exhibit “A,” but the Notice does not appear to be attached. 

C.    Method of Notice

Within 21 calendars days of Preliminary Approval, Defendant will provide the Class List to the Settlement Administrator. (Settlement Agreement, ¶ III(8)(a).) Within 14 calendar days of receiving the Class List, the Settlement Administrator will mail a Notice of Settlement to all Background Check and Waiting Time Settlement Class Members and Background Check and Waiting Time PAGA Representative Action Members via First-Class U.S. Mail, using the most current mailing addresses identified. (Settlement Agreement, ¶ III(8)(b).) The Settlement Administrator shall conduct reasonable verification measures relating to the addresses before the mailing. (Settlement Agreement, ¶ III(8)(b).) Any Notice of Settlement returned to the Settlement Administrator as non-delivered on or before the Response Deadline shall be sent to the forwarding address affixed thereto. (Settlement Agreement, ¶ III(8)(c).) If no forwarding address is provided, the Settlement Administrator will promptly attempt to determine a correct address using a skip-trace, or other search using the name, address and/or Social Security number of the Background Check/Waiting Time Settlement Class Member and/or Background Check/Waiting Time PAGA Representative Action Member involved, and shall re-mail the Notice of Settlement. (Settlement Agreement, ¶ III(8)(c).)

The proposed means of providing notice appears to provide the best possible means for giving actual notice to the putative class members.

D.    Cost of Notice

No fewer than 10 calendar days prior to the final approval hearing, the Settlement Administrator must provide the Court and all counsel for the parties with a statement detailing the Settlement Administration Costs. (Settlement Agreement, ¶ III(5).) 

Attorney’s Fees and Costs

California Rules of Court, rule 3.769(b) states: “Any agreement, express or implied, that has been entered into with respect to the payment of attorney’s fees or the submission of an application for the approval of attorney’s fees must be set forth in full in any application for approval of the dismissal or settlement of an action that has been certified as a class action.”

Ultimately, the award of attorney fees is made by the Court at the fairness hearing, using the lodestar method with a multiplier, if appropriate. (Ketchum v. Moses (2001) 24 Cal.4th 1122, 1132-1136; PLCM Group, Inc. v. Drexler (2000) 22 Cal.4th 1084, 1095-1096; Ramos v. Countrywide Home Loans, Inc. (2000) 82 Cal.App.4th 615, 625-626.) Despite any agreement by the parties to the contrary, the Court has an independent responsibility to review the attorney fee provision of the settlement agreement and award an amount that it determines to be reasonable.  (Garabedian v. Los Angeles Cellular Telephone Co. (2004) 118 Cal.App.4th 123, 128.)

The question of whether Class Counsel is entitled to the award will be addressed at the fairness hearing when Class Counsel brings a noticed motion for attorney fees. The Court will utilize the lodestar method to determine attorney fees and cross-check it against the percentage-of-recovery method. (In re Consumer Privacy Cases (2009) 175 Cal.App.4th 545, 557.) Counsel is advised that they must provide the Court with sufficient evidence so that it can properly apply the lodestar method and indicate what modifier they are seeking as to each counsel. Counsel must also give a brief summary, in chart form, of their billing records by indicating how much time was spent on discovery, motion preparation, research, etc. by each attorney or paralegal who worked on this matter.

Counsel also should be prepared to justify any costs sought by detailing how such costs were incurred.

Service Award to Class Representative

The Settlement Agreement provides for a service award of up to $1,000.00 for Plaintiff. In connection with the final fairness hearing, Plaintiff must submit her declaration attesting to why she should be entitled to an enhancement award in the proposed amount. (See Clark v. American Residential Services LLC (2009) 175 Cal.App.4th 785, 806.) 

Conclusion

Although the settlement appears to otherwise be fair and reasonable, the Court will require the parties to submit a copy of the proposed order and the proposed notice to class members for review before granting preliminary approval of the settlement.

Accordingly, the Court will continue the hearing on the Motion for Preliminary Approval of Class and Representative Action Settlement to _______________________.

Plaintiff is ordered to provide notice of this order.

DATED:  August 12, 2022                             ________________________________

Hon. Teresa A. Beaudet

Judge, Los Angeles Superior Court