Judge William A. Crowfoot, Case Number: 22AHCV00578, Date: 2025-01-22 Tentative Ruling

Judge: William A. Crowfoot, Case: 22AHCV00578, Date: 2025-01-22 Tentative Ruling

On August 12, 2022, plaintiff Trinidad Franco Lopez (“Plaintiff”) filed this action against defendant P.R. Pernecky Management Corp. (“Defendant”) for penalties under the Private Attorney General Act (“PAGA”). The parties have agreed on the terms of a settlement and now seek court approval of those terms. Under the proposed settlement, Defendant will pay a Gross Settlement Amount of $1.15 million. Of that amount, $460,000 will be paid as attorney fees (40%), $23,786.77 will be paid as costs, up to $13,000 will be paid to a settlement administrator, ILYM Group, Inc. (“ILYM”), and up to $15,000 will be paid to Plaintiff as a service award. Of the remaining $638,213.23, $159,553.31 will be paid to the aggrieved employees and $478,659.92 (75%) will be paid to the California Labor and Workforce Development Agency (“LWDA”) pursuant to Labor Code section 2699(i).

PAGA is “a procedural statute allowing an aggrieved employee to recover civil penalties for Labor Code violations that otherwise would be sought by state labor law enforcement agencies.” (Amalgamated Transit Union, Local 1756, AFL-CIO v. Superior Court (2009) 46 Cal.4th 993, 1003.) The court “shall review and approve any settlement of any civil action filed pursuant to [PAGA].” (Lab. Code, § 2699, subd. (l)(2).) However, because PAGA does not provide the standard or criteria for the review and approval of settlements, the trial court “should evaluate a PAGA settlement to determine whether it is fair, reasonable, and adequate in view of PAGA’s purposes to remediate present labor law violations, deter future ones, and to maximize enforcement of state labor laws.” (Moniz v. Adecco USA, Inc. (2021) 72 Cal.App.5th 56, 77.) To determine if a PAGA settlement is fair, reasonable, and adequate, courts consider factors “including the strength of the plaintiff’s case, the risk, the stage of the proceeding, the complexity and likely duration of further litigation, and the settlement amount. (Id. at p. 75.)

A proposed PAGA settlement must be submitted to LWDA at the same time that it is submitted to the court for review and approval. (Lab. Code § 2699, subd. (l)(2).) Plaintiff’s counsel attaches proof that the settlement was submitted to the LWDA at the same time the motion was filed. (Adams Decl., Ex. F.) Accordingly, the Court finds that this requirement is satisfied.

The “Aggrieved Employees” are defined as “all current and former hourly-paid, non-exempt employees who were employed by [Defendant] in the State of California at any time during the PAGA Period.” (Adams Decl., Ex. A, Section I, ¶ 2.) Each Aggrieved Employee’s portion of the settlement will be calculated by “(a) dividing the amount of the Aggrieved Employees’ 25% share of PAGA penalties ($159,553.31) by the total number of PAGA Period Pay Periods worked by all Aggrieved Employees during the PAGA Period and (b) multiplying the result by each Aggrieved Employee’s PAGA Period Pay Periods.” (Id., p. 5, Section III, ¶ 3(d)(i).)

Under Dunk v. Ford Motor Co. (1996) 48 Cal.App.4th 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.)

Here, the settlement agreement seems to have been reached through arm’s-length bargaining. The parties participated in a full-day mediation before neutral Chris Barnes on August 8, 2024. (Adams Decl., ¶ 20.) There also seems to have been sufficient investigation and discovery. Prior to litigation, the parties exchanged written policies and practices related to meal periods, rest periods, overtime, wage statements, payment of final wages, and any other wage-and-hour issues, sample time records and wage statements, and data demonstrating the total number of aggrieved employees and total number of pay periods. (Adams Decl., ¶ 18.) Lastly, Plaintiff’s counsel has extensive experience litigating wage-and-hour class and representative actions. (Adams Decl., ¶¶ 5-9.) Accordingly, the settlement agreement is presumptively fair. (Dunk, supra, 48 Cal.App.4th at p. 1802.)

Plaintiff’s counsel declares that based on Defendant’s payroll time records and wage statements, there is a PAGA violation approximately 25% of the pay periods within the PAGA Period (56,416 total) due to the failure to provide meal breaks, resulting in approximately 14,104 pay periods with a PAGA violation. (Adams Decl., ¶¶ 37-41.) Based on a penalty of $100, Defendant’s exposure was $1,410,400 and the penalties paid pursuant to the proposed settlement agreement are $638,213.23, resulting in $45.25 per violation. Plaintiff argues the proposed civil penalties are fair and reasonable given the risks of continued litigation, including a lower potential recovery at trial and the Court’s discretionary power to reduce any penalties awarded. The Court agrees with Plaintiff’s characterization, as other courts have imposed even smaller penalties. (See, e.g., Carrington v. Starbucks Corp. (2018) 30 Cal.App.5th 504, 517 [where violations were minimal and compliance was attempted, court imposed a penalty of $5 per violation].) The amount allocated to civil penalties is approved.

The parties have agreed to engage ILYM as the third-party administrator for the settlement funds. ILYM has agreed to administer the settlement for a capped fee of $13,000. Plaintiff’s counsel declares that in his experience, $13,000 is a reasonable amount in light of the number of Aggrieved Employees and pay periods. (Adams Decl., ¶¶ 28-29.) Accordingly, the administrator costs of $13,000 is approved.

The proposed settlement distributes $15,000 to Plaintiff as a service award. This is amounts to 0.01% of the gross settlement amount, compared with 13.9% of the gross settlement amount allocated to the Aggrieved Employees. Plaintiff declares that they were deposed and prepared for the deposition for several days. (Lopez Decl., ¶ 9.) Plaintiff also declares that they prepared for the mediation by reviewing case documents and made themselves available for further questioning. (Ibid.)

Plaintiff does not identify the approximate number of hours spent on preparing for deposition or the mediation. However, given the age of the case and the overall percentage of the gross settlement amount, the request for a $15,000 service award is approved.

Plaintiff’s counsel requests $460,000 for fees and $23,786.77 in costs to be paid out of the proposed settlement funds. Awarding a percentage of the total settlement value is a common method in determining a fee award. Here, Plaintiff’s counsel’s request for 40% of the recovery amount is reasonable and Plaintiff’s counsel attaches a copy of a document identifying all the expenses incurred. Accordingly, the request for fees and costs is approved.

The term “PAGA Released Claims” means “any and all claims, rights, demands, liabilities and causes of action for civil penalties under the PAGA asserted, or that could have been asserted in the Complaint, including, but not limited to, those under California Labor Code §§ 1197, 1197.1, 1198, 510, 511, 526(a), 558, 1194, 512(a), 201, 202, 203, 226, 226.7, 2802, 2698, the applicable IWC Wage Order and California Civil Code § 1542 release as to those sections, that arose during the PAGA Period.” (Adams Decl., Ex. F, Section 1, ¶ 21.)

The definition of “PAGA Released Claims” is too broad because it goes beyond PAGA claims to include “any and all claims . . . under the PAGA asserted, or that could have been asserted in the Complaint” while identifying statutory provisions not mentioned in the Complaint. The Complaint’s prayer for release only mentions California Labor Code §§ 201-203, 226, 226.7, 510, 511, 526(a), 1194, 1198, and 2802, as well as IWC Wage Order No. 4-2001. (Compl., Prayer for Relief, ¶¶ 2-3.) Therefore, any other statutory provision appears to exceed the scope of the action. Further, the term “applicable IWC Wage Order” is not limited to the particular wage order alleged in the Complaint. The Court additionally notes that a copy of the letter to the LWDA was not attached to this motion, therefore the Court is unable to assess whether the many statutory provisions listed in the definition of “Released Claims” exceed the scope of those that were included in the LWDA letter. Accordingly, the Court is reluctant to approve the proposed settlement at this time.

In light of the foregoing, the Court continues the hearing on this motion to _______ at 8:30 a.m. in Department 3 of the Alhambra Courthouse so that the parties may submit to the Court a copy of the predicate letter to the LWDA, revise the language defining the claims covered by the proposed settlement agreement, and provide proof that the revised language was served on the LWDA. A copy of the letter, revised agreement, and proof of service must be filed no later than 5 court days before the date of the hearing.

William A. Crowfoot

Judge of the Superior Court

Parties who intend to submit on this tentative must send an email to the Court at ALHDEPT3@lacourt.org indicating intention to submit on the tentative as directed by the instructions provided on the court website at www.lacourt.org. Please be advised that if you submit on the tentative and elect not to appear at the hearing, the opposing party may nevertheless appear at the hearing and argue the matter. Unless you receive a submission from all other parties in the matter, you should assume that others might appear at the hearing to argue. If the Court does not receive emails from the parties indicating submission on this tentative ruling and there are no appearances at the hearing, the Court may, at its discretion, adopt the tentative as the final order or place the motion off calendar.