Judge: Theresa M. Traber, Case: 20STCV25106, Date: 2023-05-05 Tentative Ruling

Case Number: 20STCV25106    Hearing Date: May 5, 2023    Dept: 47

Tentative Ruling

Judge Theresa M. Traber, Department 47

HEARING DATE:     May 5, 2023                           TRIAL DATE: VACATED.

CASE:                         Cesar Escalante et al. v. Urth Payroll Services, Inc., et al. 

CASE NO.:                 20STCV25106

MOTION FOR APPROVAL OF SETTLEMENT OF CLAIM FOR CIVIL PENALTIES UNDER THE PRIVATE ATTORNEY GENERAL ACT (LABOR CODE § 2698 ET SEQ.)

MOVING PARTY:               Plaintiffs Francesca Kortesmaki and Cesar Escalante

RESPONDING PARTY(S): No opposition on eCourt as of 5/3/23

CASE HISTORY:

·         07/01/20: Complaint filed.

·         09/21/20: Dismissal entered as to Defendant Urth Caffe Corporation.

·         03/10/22: First Amended Complaint filed.

STATEMENT OF MATERIAL FACTS AND/OR PROCEEDINGS:

This is a PAGA action for various Labor Code violations. 

Plaintiffs move for an order approving a proposed PAGA settlement.

TENTATIVE RULING:

For all the reasons explained below, the Court finds that the proposed settlement is fair and reasonable and, based on that conclusion, the motion for approval of the parties’ PAGA settlement is GRANTED. 

DISCUSSION:

Plaintiffs move for an order approving a proposed PAGA settlement.

Procedural Requirements

An application to approve a settlement under PAGA must include a copy of the proposed settlement agreement, a copy of the predicate letter to the LWDA seeking an investigation of the claims prior to filing the lawsuit, and a declaration from counsel explaining the reasonable range of recovery in the case and the reasons why the settlement is fair and reasonable.  Further, “the proposed settlement” must be given to the LWDA at the same time as the Court receives the request for approval of the settlement.  (Labor Code section 2699(l)(2).) 

The motion submitted to the Court satisfies the procedural requirements for this motion.  A copy of the proposed settlement agreement is included in with the moving papers. (Declaration of Graham S.P. Hollis ISO Mot. Exh. 1.)  Further, the declaration of counsel in support of the motion reveals that the settlement agreement was submitted to the LWDA on April 6, 2023, as is required under the statute.  (Id. ¶ 5, Exh. 2.)  Plaintiffs have not included copies of the predicate letters sent to the LWDA before filing suit. However, the predicate letters are attached to the First Amended Complaint as Exhibits 1 through 3 and are therefore in the record in this action. (FAC Exhs. 1-3.) The Court therefore finds that Plaintiffs have substantially complied with the procedural requirements of the motion.

Reasonableness of Settlement

PAGA was enacted to aid public agencies, which lack adequate funding, in enforcement of California’s labor laws. Private persons suing under the PAGA do so as a proxy of the state. (ZB, N.A. v. Superior Court (2019) 8 Cal.5th 175, 185 (Lawson).) Aggrieved employees suing under the PAGA are authorized to recover civil penalties, which advances a law enforcement function, designed to protect the public. (Ibid., citing Arias v. Superior Court (2009) 46 Cal.4th 969, 986 (Arias) and Iskanian v. CLS Transportation Los Angeles, LLC (2014) 59 Cal.4th 348 (Iskanian)).) Labor Code §2699(l)(2) requires courts to “review and approve any settlement of any civil action filed pursuant to this part.” The California Supreme Court explains that a PAGA claim is a form of a qui tam action. (Iskanian, supra, 59 Cal.4th 348, 382.)

As such, the Court looks to the standards for evaluating a qui tam settlement in assessing this settlement, that is, whether the settlement is “fair, adequate, and reasonable.” (Cf. Cal. Govt. Code § 12652 [In a qui tam action a state or political subdivision may settle the action with the defendant notwithstanding the objections of the qui tam plaintiff if the court determines, after a hearing providing the qui tam plaintiff an opportunity to present evidence, that the proposed settlement is fair, adequate, and reasonable under all the circumstances].)

An application for approval of such a settlement must demonstrate that the proposed settlement is adequate, reasonable, and fair to all those affected by it.  (Williams v. Superior Court (2017) 3 Cal.5th 531, 549.)  Those affected by a PAGA settlement include: (1) the LWDA, who receives 75% of settlement funds (Lab. Code § 2699(i)) and is “bound by the outcome of the proceeding to adjudicate the employee’s PAGA claim” (Mejia v. Merchants Building Maintenance, LLC, supra, 38 Cal.App.5th at p. 732); (2) the aggrieved employees, both party and non-party, who receive 25% percent of settlement funds and are, like the LWDA, bound by a PAGA action judgment (Lab. Code § 2699(i); Arias v. Superior Court (2009) 46 Cal.4th 969, 985); (3) plaintiffs’ counsel, who may be awarded “reasonable attorney’s fees and costs” (Lab. Code § 2699(g)(1); and (4) the defendant who pays the settlement.

Assessing the fairness and adequacy of any settlement necessitates decision-making based on unknowns. However, in determining whether a settlement falls within the parameters of what may be considered reasonable, courts regularly rely on estimates of potential maximum values weighed against weaknesses of the claims. Other important indicia of fairness include arms’-length negotiations, experienced counsel, and an adequate investigation of the claims. But the potential value of the claims being settled is primary to any evaluation. (Dunk v. Ford Motor Co. (1996) 48 Cal.App.4th 1794, 1802; Kullar v. Foot Locker Retail, Inc. (2008) 168 Cal.App.4th 116, 129-130.)

            Plaintiffs have shown the parties engaged in an arms’-length negotiation by delaying settlement negotiations until sufficient discovery was completed to review the facts and evidence and make an informed decision, and by participating in mediation with Judge Carl. J. West (Ret.) on December 13, 2022 and engaging in further settlement discussions thereafter until the settlement was reached on January 4, 2023. (Hollis Decl. ¶¶ 22-23.) Plaintiffs’ counsel have also provided evidence of their substantial experience in wage and hour litigation and in PAGA actions. (See Hollis Decl. ¶¶ 44-51.)

Further, Plaintiffs have provided sufficient evidence regarding the nature of the PAGA investigation to determine its adequacy. Plaintiffs state that “thousands” of documents were produced in discovery, consisting of personnel files, timekeeping records, wage statements, and timekeeping and payroll records for a 10% sample of the representative group, as well as Defendant’s policies and procedures relating to the claims asserted. (Hollis Decl. ¶ 20.) Defendant also produced the contact information for “nearly 1,800 current and former employees.” (Id.) In addition, Plaintiffs’ counsel conducted fact-finding interviews with more than 80 members of the representative group. (Id. ¶ 21.)

Plaintiff calculates, based on the number of workweeks and aggrieved parties, their hourly rates, and the various theories of how the Labor Code was violated, that Defendant’s potential liability was projected at more than $9.3 million.  (Hollis Decl. ¶ 26.) Counsel recounts Defendant’s contentions in opposition to the PAGA claims asserted and the concerns raised by those contentions about whether litigation of some of the PAGA claims will be considered unmanageable because of the need to address individual differences in the aggrieved parties’ circumstances.  (Id., ¶¶ 27-28.)  Plaintiffs’ counsel also discloses problems with securing the full amount of the projected penalties, the strengths of possible defenses, including those based on the unprecedented health and safety challenged that COVID-19 posed for businesses, and other problems and risks that might reduce Plaintiffs’ recovery.  (Id., ¶¶ 29-36.)  Here, the Maximum Settlement Amount is $625,000, which amounts to 6.6 percent of Defendant’s maximum potential exposure, but the Court credits the assessment of Plaintiffs’ counsel that the settlement is fair, reasonable and adequate and properly “strikes a balance between the interests of all parties, including the State of California, the general public and the PAGA Representative Group by providing timely relief while still penalizing Defendant for the violations alleged.”  (Id., ¶¶ 36-38.) 

The Court finds that the size of the proposed enhancement payments is reasonable. Under the terms of the settlement agreement, Plaintiffs Escalante and Kortesmaki are to each receive $10,000 each from the settlement funds, totaling $20,000, as service awards. (Hollis Decl. Exh. 1. p.7.) This award is to be deducted from the Maximum Settlement Amount before allocation of the Net Settlement Amount to the LWDA and the aggrieved parties. (Id.) The portion of the Net Settlement Amount available to the aggrieved parties is $78,928.17, approximately four times the total service award for both Plaintiffs. (Id. pp. 7-8.) The Court concludes that this distribution is fair and reasonable.

Plaintiffs’ counsel request $28,787.34 in costs and $250,000 in attorneys’ fees be paid out of the Maximum Settlement Amount. Plaintiffs justify this amount as appropriate arguing that Plaintiffs’ counsel achieved a favorable result in a case that was heavily litigated. This recovery matches other awards approved by courts in California for wage and hour claims. (See, e.g., Martin v. Ameripride Servs. (S.D. Cal. June 9, 2011) 2011 U.S. Dist. LEXIS 61796, 23 [“courts may award attorney’s fees in the 30-40% range in wage and hour class aactions that result in recovery of a common fund under $10 million.) Plaintiffs also provide verified statements under penalty of perjury contending that the total amount of actual attorney’s fees billed is $665,018. (Hollis Decl. ¶ 65.) The Court agrees with Plaintiffs in their characterization of the complexity and intensity of litigation in this case, as the pleadings and the right to compel arbitration in this matter were both thoroughly litigated. In light of the record showing the diligence and thoroughness displayed in litigating the case, and the evidence that Plaintiffs’ counsel are requesting a reduced amount of fees compared to what was actually billed, the Court finds the requested fees are reasonable.

Plaintiffs justify the requested $28,787.34 in costs based on the actual litigation costs incurred and contends that the $10,500 in administration costs are also fair and reasonable. Plaintiffs have provided itemized lists of costs incurred, which total $28,787.34. (Hollis Decl. ¶ 68.)  The Court also finds that $10,500 in settlement administration costs are reasonable for distribution of fund to as many as 1,800 aggrieved parties.  (Hollis Decl. ¶ 20.)   

The release to be imposed on aggrieved parties states:

Upon the Effective Date, except as to the right to enforce the terms and conditions of the settlement, Plaintiffs, in their representative capacity as private attorneys general and acting on behalf of themselves, the State of California, the LWDA, and the PAGA Representative Group, release the Released Parties of all claims pursuant to PAGA, based on the facts, legal theories, and primary rights asserted in the original Complaint, the First Amended Complaint, and the LWDA Notices, and all claims that could have been reasonably asserted in the Action based on the facts alleged, whether or not specifically delineated as a claim or cause of action

. . .

The Released PAGA Claims shall cover the PAGA period.

(Hollis Decl. Exh. 1 pp. 9-10.)

In the Court’s view, a release must focus solely on the extinguishment of claims for PAGA penalties for the Labor Code violations alleged in Plaintiffs’ LWDA letter against Defendant alone to be reasonable. The Court finds that the release is appropriately limited to those claims for PAGA penalties for Labor Code violations alleged in the LWDA letter, on the basis that both the letter and the pleadings allege essentially the same facts, circumstances, and rights at issue, including the same enumerated causes of action.

For all the reasons explained above, the Court finds that the proposed settlement is fair and reasonable and that it should be approved.

CONCLUSION:

For the reasons above, Plaintiff’s motion for approval of settlement of their claims is GRANTED.

Moving party to give notice, unless waived.

IT IS SO ORDERED.

Dated:   May 5, 2023                          ___________________________________

                                                                                    Theresa M. Traber

                                                                                    Judge of the Superior Court

            Any party may submit on the tentative ruling by contacting the courtroom via email at Smcdept47@lacourt.org by no later than 4:00 p.m. the day before the hearing.  All interested parties must be copied on the email.  It should be noted that if you submit on a tentative ruling the court will still conduct a hearing if any party appears. By submitting on the tentative you have, in essence, waived your right to be present at the hearing, and you should be aware that the court may not adopt the tentative, and may issue an order which modifies the tentative ruling in whole or in part.