Motion for Preliminary Approval of Class Action and PAGA Settlement (Judge Patricia Lucas)


SUPERIOR COURT OF CALIFORNIA

COUNTY OF SANTA CLARA

 

Coordination Proceeding Special Title (Rule 3.550)

 

 

SOS WAGE AND HOUR CASES

 

JUDICIAL COUNCIL COORDINATION PROCEEDING NO. 5133

 

TENTATIVE RULING RE:  MOTION FOR PRELIMINARY APPROVAL OF CLASS ACTION [AND PAGA] SETTLEMENT

 

 

 

The above-entitled action comes on for hearing before the Honorable Patricia M. Lucas on August 10, 2022, at 1:30 p.m. in Department 3.  The court now issues its tentative ruling as follows:

  1. INTRODUCTION

This is a coordinated action involving the following cases:

  • Harbour v. SOS Security, LLC, et al., Case No. 19STCV33232, Los Angeles County Superior Court (“Harbour”);
  • Williams v. SOS Security, LLC, et al., Case No. 20CV362050, Santa Clara County Superior Court (“Williams”);
  • Marmolejo, et al. v. SOS Security, LP, Case No. 20CV367423, Santa Clara County Superior Court;
  • Muse v. SOS Security, LLC, et al., Case No. RG20066195, Alameda County Superior Court (“Muse”); and
  • Towns v. SOS Security, LLC, Case No. 21TRCV00063, Los Angeles County Superior Court.

On May 25, 2022, plaintiffs Aaron Harbour (“Harbour”), Esther Williams, and Brandon Muse (collectively, “Moving Plaintiffs”) filed a First Amended Complaint (“FAC”) against defendants SOS Security, LLC and SOS Security, LP (collectively, “Defendants”), which sets forth the following causes of action: (1) Failure to Provide Meal Periods (Lab. Code §§ 204, 223, 226.7, 512 and 1198); (2) Failure to Provide Rest Periods (Lab. Code §§ 204, 223, 226.7 and 1198); (3) Failure to Pay Hourly Wages (Lab. Code §§ 223, 510, 1194, 1194.2, 1197, 1997.1 and 1198); (4) Failure to Pay Vacation Wages (Lab. Code § 227.3); (5) Failure to Indemnify (Lab. Code § 2802); (6) Failure to Provide Accurate Written Wage Statements (Lab. Code § 226(a)); (7) Failure to Timely Pay All Final Wages (Lab. Code §§ 201, 202 and 203); (8) Unfair Competition (Bus. & Prof. Code § 17200 et seq.); and (9) Civil Penalties (Lab. Code § 2698 et seq.).

Moving Plaintiffs have reached a settlement with Defendants.  Moving Plaintiffs now move for preliminary approval of the settlement.

  1. LEGAL STANDARD

Generally, “questions whether a settlement was fair and reasonable, whether notice to the class was adequate, whether certification of the class was proper, and whether the attorney fee award was proper are matters addressed to the trial court’s broad discretion.”  (Wershba v. Apple Computer, Inc. (2001) 91 Cal.App.4th 224, 234-235 (Wershba), citing Dunk v. Ford Motor Co. (1996) 48 Cal.App.4th 1794 (Dunk).)

In determining whether a class settlement is fair, adequate and reasonable, the trial court should consider relevant factors, such as “the strength of 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.”

 

(Wershba, supra, 91 Cal.App.4th at pp. 244-245, citing Dunk, supra, 48 Cal.App.4th at p. 1801 and Officers for Justice v. Civil Service Com’n, etc. (9th Cir. 1982) 688 F.2d 615, 624 (Officers).)

“The list of factors is not exclusive and the court is free to engage in a balancing and weighing of factors depending on the circumstances of each case.”  (Wershba, supra, 91 Cal.App.4th at p. 245.)  The court must examine the “proposed settlement agreement to the extent necessary to reach a reasoned judgment that the agreement is not the product of fraud or overreaching by, or collusion between, the negotiating parties, and that the settlement, taken as a whole, is fair, reasonable and adequate to all concerned.”  (Ibid., quoting Dunk, supra, 48 Cal.App.4th at p. 1801 and Officers, supra, 688 F.2d at p. 625, internal quotation marks omitted.)

The burden is on the proponent of the settlement to show that it is fair and reasonable.  However “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.”

 

(Wershba, supra, 91 Cal.App.4th at p. 245, citing Dunk, supra, 48 Cal.App.4th at p. 1802.)

  • DISCUSSION
  1. Provisions of the Settlement

The Harbour, Williams, and Muse cases have been settled on behalf of the following class:

[A]ll persons employed by Defendants (including acquired entity First Alarm Security & Patrol, Inc.) as non-exempt employees performing security-related duties (including but not limited to security officers) in California from November 21, 2017 to June 5, 2020, except that for employees working for First Alarm, the class period shall be July 25, 2019 to June 5, 2020.

 

(Declaration of George S. Azadian in Support of Plaintiffs’ Motion for Preliminary Approval of Class Action Settlement (“Azadian Dec.”), Ex. 1 (“Settlement Agreement”), ¶¶ 1 & 5.)  Moving Plaintiffs explain that the class period reflects the parties’ agreement to exclude time periods already covered by two prior class and Private Attorney General Act (“PAGA”) settlements: (1) Bell v. SOS Security (Alameda County Superior Court, Case No. RG17847734), which settled and released class and PAGA claims by security officers for the time period of January 31, 2013 to November 20, 2017; and (2) Stricklin v. First Alarm Security & Patrol, Inc. (Santa Clara County Superior Court, Case No. 18CV323753), which settled and released class and PAGA claims on behalf of security officers working for First Alarm (acquired by Defendants in 2018) through July 24, 2019.

According to the terms of settlement, Defendants will pay a total non-reversionary amount of $3,000,000.  (Settlement Agreement, ¶ 12.)  The total settlement payment includes attorney fees up to $1,000,000 (1/3 of the gross settlement fund), litigation costs not to exceed $35,000, service awards in the total amount of $22,500 ($7,500 for each class representative), settlement administration costs not to exceed $60,000 (currently estimated at $26,500), and a Labor and Workforce Development Agency Payment of $300,000 (75 percent of which will be paid to the LWDA and 25 percent of which will become part of the net settlement amount).  (Settlement Agreement, ¶¶ 2, 7, 14, 26, 29, & 30-33.)  The net settlement will be distributed to participating class members pro rata based on the number of workweeks worked during the class period.  (Settlement Agreement, ¶¶ 13, 15, 19, 28, & 34-35.)

Checks remaining uncashed more than 180 days after mailing will be void and the funds from uncashed checks will be tendered to the State Controller’s Office, Unclaimed Property Division.  (Settlement Agreement, ¶ 52.)

In exchange for the settlement, the participating class members will release Defendants, and their related entities and persons, from any and all claims and remedies asserted or that could have been asserted in the Harbour, Williams, and Muse cases arising out of the factual allegations in Harbour, Williams, and Muse cases, including in the FAC, during the class period.  (Settlement Agreement, ¶¶ 1, 9, 22-23, 48, & 60.)

Moving Plaintiffs also agree to a comprehensive general release.  (Settlement Agreement, ¶ 64.)

  1. Fairness of the Settlement

Moving Plaintiffs assert that the settlement is fair and reasonable.  Moving Plaintiffs state that the settlement was reached through arm’s-length negotiations, after extensive investigation and discovery, and mediation with Michael Dickstein, Esq.  Moving Plaintiffs advise that there are approximately 5,095 individuals in the class; there are approximately 4,572 class members in the one-year period prior to the filing of the earliest-filed LWDA letter in the Harbour case; the class worked a total of 147,659 workweeks; and there were 127,987 pay periods worked by the class in the one-year period prior to the filing of the earliest-filed LWDA letter in the Harbour case.  Moving Plaintiffs estimate that Defendants’ maximum potential exposure for the claims ranges from approximately $57,672,988 to $59,816,601.  (Azadian Dec., ¶¶ 21-42.)  Moving Plaintiffs provide a detailed breakdown of this amount by claim.  (Ibid.)  As is relevant here, Moving Plaintiffs state that the statute of limitations of PAGA is one year, and that discovery revealed there were 127,987 pay periods worked by class members in the applicable statutory period.  Moving Plaintiffs used that time period to calculate Defendants’ exposure for PAGA penalties.  Moving Plaintiffs discounted the potential value of their claims given the risks inherent in continued litigation, the fact that some class members signed arbitration agreements, the fact that some class members are covered by collective bargaining agreements, the strength of Defendant’s defenses, the difficulties involved in obtaining class certification, and the court’s ability to reduce PAGA penalties.  (Ibid.)  Moving Plaintiffs state that the estimated net settlement amount is approximately $1,691,000.  Moving Plaintiffs conclude that the estimated average individual settlement payment is approximately $332.11, the estimated highest individual settlement payment is $1,442.70, and the estimated lowest individual settlement payment is $11.45.  (Id. at ¶ 7.)

Although Moving Plaintiffs’ motion is entitled “motion for preliminary approval of class action settlement,” it includes a request to settle PAGA claims.  However, the settlement does not identify those class members who are aggrieved employees for purposes of PAGA, define the applicable PAGA period, or provide for a separate PAGA payment to be made to aggrieved employees.  Under the terms of the settlement, 25 percent of the PAGA allocation (i.e., $75,000) intended for aggrieved employees will remain in the net settlement amount. (Settlement Agreement, ¶ 33.)  The net settlement will then be distributed to all participating class members pro rata based on the number of weeks worked during the class period.  (Settlement Agreement, ¶¶ 13, 15, 19, 28, & 34-35.)  Thus, each and every class member will receive a share of the PAGA allocation—whether or not they are aggrieved employees.

Moving Plaintiffs state that the PAGA period began one year prior to the filing of the earliest-filed LWDA letter in the Harbour case.  The FAC alleges that Harbour submitted a letter to the LWDA on July 8, 2019.  Thus, it appears that the PAGA period began on July 8, 2018 (several months after the start of the class period).  Moving Plaintiffs further state that only 4,572 of the 5,095 class members worked for Defendants during the PAGA period.  Thus, the approximately 523 class members who did not work for Defendants during the PAGA period are not entitled to any portion of the PAGA allocation.  Accordingly, the court finds that the proposed distribution of the PAGA allocation renders the settlement unfair.

  1. CONCLUSION

In light of the foregoing, the motion for preliminary approval of the settlement is DENIED.

 

The court will prepare the final order if this tentative ruling is not contested.