Motion for PAGA Approval (Judge Lon Hurwitz)


PROCEDURAL HISTORY: Plaintiff Silva filed the operative complaint (ROA 2) on August 20, 2021 and filed his Motion for Court Approval of the PAGA Settlement on March 23, 2022 (ROA 40). On May 6, 2022, Plaintiff In Intervention (Arreola) filed a Motion for Leave to Intervene (ROA 54), which was granted on August 12, 2022 (ROA 71). Arreola claims Silva has not adequately represented her interests and her own claim in that her Santa Clara Superior Court case overlaps with Silva’s claim. Her claim would arguably be extinguished by the proposed settlement.

Arreola filed her Complaint-in-Intervention on August 18, 2022 (ROA 83). On September 6, 2022, Defendant filed a notice of related case, identifying Gary Miller v. Premier Automotive of Seaside, LLC, Case NO. 21CV003719 and Jamie Bridges v. Premier Nissan of San Jose, LLC, Case No. 22CV394491, both venued in the Monterey County Superior Court (ROA 87). Miller and Bridges were filed on November 29, 2021, and February 18, 2022, respectively.

The Court posted a tentative ruling to the Motion for Approval on September 30, 2022 (ROA 95), requesting that Plaintiff address specific concerns.

On October 5, 2022, the parties appeared before the Court and the Court rejected the tentative ruling (ROA 102). Instead, the Court continued the hearing and set a briefing schedule per code for Arreola to file an opposition to the motion.

ANALYSIS:

An Intervenor has standing to object. Moniz v. Adecco USA, Inc. (2021) 72 Cal.App.5th 56 “[W]here two PAGA actions involve overlapping PAGA claims and a settlement of one is purportedly unfair, it follows that the PAGA representative in the separate action may seek to become a party to the settling action and appeal the fairness of the settlement as part of his or her role as an effective advocate for the state.” (Moniz at 73).

An unjustified reduction cannot be said to yield a “genuine and meaningful” PAGA settlement. (O’Connor v. Uber Techs., Inc., 201 F. Supp. 3d at 1133.) “In determining whether the proposed settlement falls within the range of reasonableness, perhaps the most important factor to consider is plaintiffs’ expected recovery balanced against the value of the settlement offer.” (Id. [citing Cotter v. Lyft, Inc. (N.D. Cal. Apr. 7, 2016) 176 F.Supp.3d 930, 935].)

The stipulation for settlement brought in federal court is materially similar to the settlement in this case and call for a $100,000 settlement with $41,000 allocated to plaintiff’s counsel’s fees and costs. (Compare ROA 106, Villalba Decl. Ex. A, p. 7:2-27 with ROA 37, Varisco Decl. Ex. A ¶ 31.) Only $14,750.00, or 25% of the remaining $59,000, will be paid to the PAGA members on a pro-rata basis. The parties appear to concede (at least in the federal case) that there are 1,104 members subject to the settlement figure. On average, each member will receive $13.36. In his Declaration, Plaintiff’s counsel also states his lodestar multiplier is 0.65, and his original incurred fees are $53,720—more than half of the GSA. (ROA 106, Villalba Decl., Ex. C [Nunes Decl.] ¶ 37.) The minute order only states that the PAGA settlement is denied as the Court cannot conclude the settlement is fair and reasonable.

The absence of any substantive information in the initial motion is particularly troublesome given this calculation. With over 1,000 aggrieved employees, it is completely unclear how the parties came to a settlement of $100,000.

Plaintiff argues it would have been subjected to a remand, but Plaintiff ignores the fact that it was Plaintiff himself who decided to dismiss the federal claim, making himself susceptible to the remand. This argument that dismissal in the federal court was “inevitable” is completely unavailing.

In light of the prior federal case, the missing information noted above is particularly concerning as it appears the parties have attempted to file the same paperwork in a new forum. There is no additional information provided in the motion filed in this forum, despite Judge Sanders’ guidelines on her tentative rulings page, most of which remain in effect.

It is also concerning that while Plaintiff usually brings a motion for preliminary approval, this motion appears to have been prepared by defense counsel, as the motion and supporting papers (including Plaintiff’s counsel’s declaration) were prepared on defense counsel’s pleading paper. (ROA 35, 37, 40.) Given the number of other related actions pending, the number of aggrieved parties, and the paltry average settlement of $13.36 which is less than California’s minimum wage as of January 1, 2023, this cannot be said to be a fair settlement.

Finally, both Plaintiff and Defendant did not satisfactorily address the inquiries of the Court. It provided absolutely no calculations as to how it came up with a value of $5,280,000. They provide no calculations as to how this figure was further reduced to a mere $100,000. This is approximately 2% of the value. Also, the parties provide no substantive discussion as to how the settlement in Miller v. Premier Automotive of Seaside, LLC case that is pending in Monterey Superior Court affects this current matter.

However, Plaintiff should be given the opportunity to cure the defects in the motion.

RULING:

The moving parties have not met their burden to establish the settlement is fair and reasonable. The Court has reviewed the Opposition filed by Plaintiff-in-Intervention Celia Arreola, and her points are well taken. Unlike Plaintiff and Defendants in their moving papers, Arreola has provided calculations regarding the value of the PAGA members claims (ROA 104, p. 13:25-16:13). Based on her calculations, on average, each PAGA member will receive $13.36, which is less than California’s hourly minimum wage as of January 1, 2023.

The moving parties’ valuation in the Reply is equally unsettling. The parties value the claim at $5,280,000. Without providing any further calculations whatsoever, the parties then argue that $100,000, a paltry 2% of the moving parties’ own valuation, is fair and equitable. The Court, the class members Plaintiff purports to represent, and the general public need more information than a blanket statement regarding fairness of a settlement. Given that Plaintiff’s counsel is requesting $41,000 in fees and costs for line items such as three hours for choosing a mediator (ROA 110, Reply p. 11:25-12:1); eight hours for drafting what is essentially a form PAGA complaint (Id. at 12:7); and lunch with his client (ROA 110, Reply p. 12:6), it is completely unclear how a gross settlement amount of $100,000 is reasonable under the totality of the circumstances.

Also, the Court cannot help but notice there are indications this settlement may not have been conducted at arms-length. First, Plaintiff’s proffered reason for dismissing the federal action and re-filing the action in state court is unavailing. Plaintiff had complete control over his federal cause of action and he apparently made the decision to dismiss the claim after a settlement was reached. Without any additional information, it appears on its face that the Plaintiff is forum shopping, given the timing of the settlement in federal court, the federal court’s ruling on the motion for good faith settlement, and subsequent dismissal and re-filing of the instant action.

Additionally, counsel for Defendants have apparently taken over the settlement approval process. Both the moving papers and the reply are on defense counsel’s letterhead. Plaintiff’s counsel’s experience in handling PAGA actions is limited at best. (ROA 35, Nunes Decl. ¶ 32.) This is further supported by the lack of any settlement calculations in the moving papers and the lack of content in the proposed judgment submitted on defense counsel’s pleading paper, which clearly states the fees and costs Plaintiff’s counsel is entitled to receive but provides almost no other information, including basic information such as the Court retaining jurisdiction to enforce the settlement (ROA 41). Both Plaintiff and his counsel appear to be equally disinterested in the settlement process, despite Mr. Nunes’s claim he spent 22 hours on work for this approval motion. (ROA 110, Reply p. 12:10-11.) Mr. Nunes’ declaration is also on defense counsel’s letterhead. Plaintiff himself did not submit a declaration. The supporting documents, including Plaintiff’s complaint and Plaintiff’s LWDA letters, are purportedly authenticated by defense counsel. Even the settlement submission to the LWDA was performed by defense counsel. Note, the Court is not making a finding regarding collusion at this time. The Court simply cannot determine that the settlement is fair and reasonable without additional information in the context of this background.

The Court is inclined to deny the motion as there is absolutely no factual basis establishing the settlement is fair and reasonable. However, prior to doing so, the Court will give Plaintiff one last opportunity to address the Court’s continued concerns:

  1. Plaintiff’s counsel must address ALL related cases that are currently active in any United States District Court in the State of California or the Superior Courts of the State of California, including but not limited to the disclosed related actions. Counsel must further disclose any similar PAGA action previously filed against any of the Defendants in any United States District Court in the State of California or the Superior Courts of the State of California and whether those actions were dismissed, settled, and/or tried. What relationship do the claims have to the claims in this case? How do those active and previous claims affect the settlement in this matter? How does settlement of the Miller case affect the current settlement? A statement of the case’s current stage of the litigation is insufficient without further analysis.
  2. Provide detailed calculations as how the claims were discounted for settlement purposes from the purported figure of $5,280,000, and why the claims were discounted to 2% of the value, or $100,000. The calculations must include a discussion of the number of aggrieved employees and the number of violations per claim in addition to the total value. General discussions of the Defendants’ affirmative defenses and statements that they may have defensed the case are insufficient. Without numerical support, this Court cannot and will not approve a settlement figure of $100,000.
  3. Provide a breakdown of attorney hours spent on various categories of activities in the prior federal action, Case No. 21:20-cv-03671-DDP-MAA: Silva v. Premier Chevrolet of Buena Park, LLC. Plaintiff’s counsel requests $35,000 for fees and costs for “prosecuting the PAGA claim” in the federal action (ROA 106, Ex. 3 ¶ 13) and the same amount for this instant action (ROA 35 ¶ 38). While the Court intends to consider reasonable work performed in analyzing the PAGA claim in both matters and preparing to mediate, it is inclined to disregard fees for work performed in the federal action that was subsequently dismissed (filing the initial complaint, law and motion, stipulations, etc.). It is also inclined to disregard fees for taking a client to lunch and further discount fees for an exorbitant number of hours dedicated to mundane legal tasks such as choosing a mediator and drafting a simple PAGA complaint.
  4. The parties’ argument that Defendants are “equipped” to handle administration of settlement solely because they have “easy access” to all of the contact information of the class members is underwhelming, completely unconvincing, and supports an argument of a reverse auction as the request seeks to avoid additional fees on its face. The Court will require the use of a third-party administrator absent a clear demonstration of Defendants’ capabilities in administering a settlement to over 1,000 class members, supported by declarations of the individual(s) administering the settlement and a detailed description of his/her/their experience in any similar endeavor. The declaration(s) should discuss experience in skip tracing.

If Plaintiff is unable to address the Court’s inquiries to the Court’s satisfaction, the Court is inclined to deny the motion absent good cause.

The Motion for Preliminary Approval is continued to April 21, 2023 at 1:30 p.m. in Dept. CX103. It is not necessary for Plaintiffs to resubmit briefing which has already been filed with the court. Supplemental declarations or other supplemental materials shall be filed at least nine (9) court days prior to the hearing. If a revised settlement, declaration(s), and/or proposed Notice are submitted, a redlined version showing all changes, deletions, and additions must also be submitted electronically to the Court. Intervenor may (but is not required to) file a response, including but not limited to objections, to the supplemental materials at least five (5) court days prior to the hearing.

The hearing has been continued to the first available date. There are no earlier dates available. The court does not require any physical or remote appearance at the hearing scheduled for January 6, 2023.