Judge: Theresa M. Traber, Case: 22STCV17088, Date: 2024-04-29 Tentative Ruling

Case Number: 22STCV17088    Hearing Date: April 29, 2024    Dept: 47

Tentative Ruling

Judge Theresa M. Traber, Department 47

HEARING DATE:     April 29, 2024                        TRIAL DATE: NOT SET

CASE:                         Liset Perez v. Chik Enterprises

CASE NO.:                 22STCV17088           

MOTION FOR APPROVAL OF PAGA SETTLEMENT

MOVING PARTY:               Plaintiff Liset Perez

RESPONDING PARTY(S): No response on eCourt as of 4/24/24

STATEMENT OF MATERIAL FACTS AND/OR PROCEEDINGS:

            This is a PAGA action that was filed on May 20, 2022. Plaintiff alleges that Defendant has systematically required its employees to perform pre-shift and post-shift unpaid work and requiring its employees to work through their 30-minute meal periods.

Plaintiff moves for approval of a proposed settlement agreement.

TENTATIVE RULING:

Plaintiff’s motion for approval of settlement of her claims for civil penalties under PAGA is CONTINUED to Wednesday, May 29, 2024 at 9:00 AM. Plaintiff is ordered to serve and file a revised settlement agreement on or before Wednesday, May 22, 2024 pursuant to the Court’s ruling herein.

DISCUSSION:

Plaintiff moves for approval of a proposed settlement agreement in which Defendant will pay $191,750 to settle all claims.

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 meets some of the procedural requirements for this motion.  A copy of the proposed settlement agreement is included.  (Declaration of James A. De Sario ISO Mot Exh. A.)  Further, the declaration of counsel in support of the motion reveals that the settlement agreement was simultaneously submitted to the LWDA as is required under the statute, with confirmation of service via online upload.  (Id. ¶ 20, Exh. D.) However, Plaintiff has not provided the Court with a copy of the predicate letter sent to the LWDA before filing suit. Plaintiff has therefore failed to satisfy 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. 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.)

            Plaintiff has shown the parties engaged in an arms’-length negotiation by independently meeting and conferring and participating in mediation with the Hon. Steven R. Denton (Ret.) on May 18, 2023 and September 6, 2023, resulting in this settlement. (De Sario Decl. ¶ 5.) Plaintiff’s counsel has also provided evidence of their substantial experience in wage and hour litigation and in PAGA actions. (Id. ¶¶ 12-13.)

Further, Plaintiff has provided sufficient evidence regarding the nature of the PAGA investigation to determine its adequacy. Plaintiff states that Defendant produced a random sampling of time and payroll records, as well as wage and hour policies and relevant policy documents in place during the relevant time period. (De Sario Decl. ¶ 4.) Plaintiff states that there were approximately 323 aggrieved employees, including Plaintiff, during the relevant time period, for which there were 4,608 pay periods between May 20, 2021 through September 15, 2023. (Id. ¶¶ 7-8.) The Court finds that, based on this evidence, the investigation of the PAGA claims was adequate to justify a settlement.

Plaintiff calculates, based on the number of workweeks and aggrieved parties, their hourly rates, and the theories of how the Labor Code was violated, that the maximum value of the claims would be $808,900. (De Sario Decl. ¶ 8.) Applying the same fee structure as in the proposed settlement, this would result in a total net settlement amount to the aggrieved parties of $202,225 amounting to an average recovery of $626.08 to each the 323 aggrieved parties, not accounting for attorney’s fees or enhancements. Here, the settlement proposes to distribute $25,543.13 (representing 25% of the net Settlement Fund after enhancements, administration costs, and attorney’s fees) among the 323 aggrieved parties for an average recovery of approximately $79.08 each. (De Sario Decl. Exh. A § 4.6.) The Court finds that Plaintiff has offered sufficient evidence to determine the relative strength of the claims and the range of possible settlement values.

The proposed enhancement payment to be paid to Plaintiff out of the settlement funds appears reasonable. Under the terms of the settlement agreement, Plaintiff is to receive $2,000 from the settlement funds, amounting to 1.04% of the total settlement funds, contrasting with the 53% allotted to the net settlement amount and 13% allotted to the funds to be distributed to aggrieved employees.

Plaintiff’s counsel request that $9,652.75 in costs and $67,112.50 in attorneys’ fees be paid out of the settlement funds. Plaintiff justifies this amount as appropriate on the basis that Plaintiff’s counsel achieved a favorable result in a case that required thorough investigation and intensive negotiations, and for which there were several potentially meritorious defenses. 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 actions that result in recovery of a common fund under $10 million.) Plaintiff’s counsel does not provide itemized billing records, but lists the total costs incurred in a declaration under penalty of perjury. (De Sario Decl.¶ 19.) Plaintiff’s counsel also states under penalty of perjury that Attorney Michael Nourmand billed $40,672.50 in attorney’s fees, accounting for 54.23 hours at $750 per hour, and Attorney De Sario billed $40,000 in fees, accounting for 80 hours at $500 per hour. (Id. ¶ 14.) Thus, Plaintiff’s counsel are requesting reduced fees compared to the fees actually billed. Given this showing, the Court finds that the requested fees are reasonable based on the evidence provided.

Plaintiff justifies the requested $9652.75 in costs on the basis of the actual litigation costs incurred in this amount. (De Sario Decl. ¶ 19.) The itemized list of costs accounts for the costs actually incurred. However, the Court observes that the proposed settlement allocates considerably more costs to Plaintiff’s counsel than what is requested on this motion. The cost allocations in the settlement should be adjusted to account for the reduction in claimed costs, with the remainder to be returned to the net settlement amount pursuant to the terms of the settlement agreement.

Plaintiff does not state why CPT Group was selected as the administrator but states that CPT Group “indicated” that the costs to administer the settlement would be $10,804.21, the amount sought in allotment for the settlement administrator. (De Sario Decl. ¶ 19.) The Court therefore finds that Plaintiff has justified the allotment.

The release to be imposed on aggrieved parties states that all aggrieved parties shall be deemed to have released Defendants or any related entity from:

[A]ny and all claims, rights, demands, liabilities and causes of action that arose during the PAGA Period for civil penalties under the PAGA that were pled or which reasonably could have been pleaded based on the factual allegations pled in Plaintiffs notice to the LWDA, dated May 20, 2022, and the operative Complaint (i.e., the "First Amended Complaint filed on November 1, 2022") alleging claims for PAGA civil penalties, and the theories on which the PAGA claims are premised including: (1) failure to pay overtime wages; (2) failure to pay minimum wages; (3) failure to provide meal periods; (4) failure to provide erst periods; (5) failure to pay all wages upon termination; (6) failure to provide accurate wage statements; and (7) failure to reimburse business related expenses. Aggrieved Employees cannot opt-out of the Release PAGA Claims. The Released PAGA Claims exclude claims for workers' compensation or unemployment insurance benefits and Plaintiffs individual wage and hour claims for unpaid wages, interest, liquidated damages, statutory penalties, etc.

(De Sario Decl. Exh. A. § 1.23.)

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 Plaintiff’s LWDA letter against Defendant alone to be reasonable. Without a copy of the LWDA letter to assess whether the claims and facts identified here mirror those in the predicate letter, the Court cannot adequately assess the reasonableness of the release. Plaintiff must provide a copy of the LWDA predicate letter so the Court may properly evaluate the release of claims.

            Had Plaintiff presented the missing materials identified herein, the Court might be inclined to find the proposed settlement to be fair and reasonable. However, without such evidence, there is not a sufficient basis to make this determination. The Court will therefore exercise its discretion to order a continuance of this matter to permit Plaintiff to serve and file the requisite materials.

CONCLUSION:

            Accordingly, Plaintiff’s motion for approval of settlement of her claims for civil penalties under PAGA is CONTINUED to Wednesday, May 29, 2024 at 9:00 AM. Plaintiff is ordered to serve and file a revised settlement agreement on or before Wednesday, May 22, 2024 pursuant to the Court’s ruling herein.

            Moving Party to give notice.

IT IS SO ORDERED.

Dated:  April 29, 2024                                    ___________________________________

                                                                                    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.