Marmolejo v. Significant Cleaning Services, LLC

II. Defendant’s Opposition

Defendant opposes preliminary approval on several grounds. First, it contends that no enforceable settlement exists because it never executed the long-form agreement and never assented to all material terms. (Opposition, pp. 10–14.) Second, it argues that the settlement process was procedurally unreliable considering the multi-year delay between the 2023 mediation and the present motion. (Id. at pp. 14–17.) Third, it asserts that it can no longer fund the settlement, citing an approximately 53 percent decline in revenue since 2023 and increased operating costs, and it contends that performance is excused under the doctrine of commercial impracticability. (Id. at pp. 18.) Fourth, it argues that Plaintiff’s delay bars relief under principles of laches. (Id. at pp. 18–19.)

Based on these contentions, Defendant asks the Court to deny the motion without prejudice and to impose a 45-to-90 day stay so that the parties may negotiate a reduced, “ability-to-pay” settlement. Defendant also identifies asserted deficiencies in the proposed notice, including the absence of any Spanish-language notice for a workforce it represents is approximately 85 percent Spanish-speaking, the absence of information regarding the proposed administrator, and inconsistencies between the notice and the MOU.

III. Evidentiary Issues

In connection with his reply, Plaintiff objects to the declarations of Karin Backstrom and Frank Duignan submitted with the opposition. Plaintiff first objects that the opposition and the Duignan declaration were untimely under Code of Civil Procedure section 1005, subdivision (b). The Court has discretion to consider or to disregard late-filed papers, so long as it does not do so arbitrarily. (Cal. Rules of Court, rule 3.1300(d); Kapitanski v. Von’s Grocery Co. (1983) 146 Cal.App.3d 29, 32–33.) Given the Court’s independent duty to protect absent class members, the Court exercises its discretion to consider the opposition and the supporting declarations.

On June 26, 2026, the Court granted Defendant’s ex parte request to excuse the delay and consider the late opposition on its merits. The Court likewise OVERRULES the untimeliness objections.

Plaintiff also objects to portions of the Backstrom declaration on the grounds of lack of foundation and hearsay. Ms. Backstrom is Defendant’s counsel, and her statements describing Defendant’s financial condition are not shown to rest on her personal knowledge. The Court SUSTAINS the objections on the grounds of lack of foundation and hearsay as to Ms. Backstrom’s statements describing Defendant’s financial condition and ability to pay. The Court OVERRULES the remaining objections. As explained below, the Court’s ruling does not depend on the contested financial evidence.

IV. The MOU is Binding and Sufficiently Definite

Before turning to the standards governing preliminary approval, the Court addresses Defendant’s threshold contention that there is no settlement to approve. The Court concludes that the MOU is a binding and sufficiently definite settlement. The MOU is signed by both parties, and Defendant authenticated the identical document as an exhibit to its opposition. The MOU states that it is “enforceable by, binding on, admissible, and subject to disclosure by all Parties.” (MOU, ¶ 1.) It further provides that, if the parties do not execute a long-form agreement, “this agreement will be final, binding and enforceable pursuant to California Code of Civil Procedure section 664.6,” and that “either party may move for preliminary approval of this class action settlement on the basis of the terms set forth in this MOU.” (Id. at ¶ 2.) The MOU thus expressly contemplates the relief Plaintiff seeks.

Defendant’s argument that there was no meeting of the minds conflates the MOU with the long-form agreement. The MOU is the operative contract, and the parties’ failure to execute a long-form agreement does not render it unenforceable. The MOU is also sufficiently definite. A settlement is enforceable if the parties have agreed to all material terms; whether a term is material turns on its relative importance and whether its absence would make enforcement unfair. (Eagle Fire & Water Restoration, Inc. v. City of Dinuba (2024) 102 Cal.App.5th 448, 468–469.)

The MOU sets forth the gross settlement amount and payment schedule, the class definition and class period, the release, the PAGA allocation, the caps on fees, costs, the service award, and administration, the distribution formula, the tax allocation, the cy pres recipient, and the opt-out procedure. The terms Defendant identifies as missing concern the mechanics of notice and administration, which the parties expressly agreed would be supplied by “customary terms and procedures.” (MOU, ¶ 2.) Filling those gaps with a customary form does not rewrite the parties’ agreement but rather enforces it. As such, this case is unlike Weddington Productions, Inc. v. Flick (1998) 60 Cal.App.4th 793, where material terms remained unresolved.

Defendant’s remaining defenses do not alter this conclusion. Financial inability to perform is not a defense of impossibility or impracticability; the impossibility must inhere in the nature of the performance and not in the obligor's lack of funds. (Autry v. Republic Productions, Inc. (1947) 30 Cal.2d 144, 148.) A party may not avoid a contract merely because performance has become more costly or results in a loss. (Habitat Trust for Wildlife, Inc. v. City of Rancho Cucamonga (2009) 175 Cal.App.4th 1306, 1336.)

The laches argument fails because the cause of the delay is disputed, and the asserted prejudice is not established by competent evidence. The settlement’s deferred Effective Date and installment structure, together with the Court’s continuing oversight, adequately protect the class. Any question of collectability may be addressed at final approval. For the reasons stated, the Court rejects the Defendant’s arguments regarding the enforceability and adequacy of the MOU, and therefore the Court evaluates the settlement under the governing standards.

V. Legal Standard for Settlement Agreements

“In general, 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, disapproved of on other grounds by Hernandez v. Restoration Hardware, Inc. (2018) 4 Cal.5th 260.) The most important factor is the strength of the plaintiffs’ case on the merits, balanced against the amount offered in settlement. (See Kullar v. Foot Locker Retail, Inc. (2008) 168 Cal.App.4th 116, 130.)

Like its review of class action settlements, a trial court must also “review and approve” any settlement of an action filed under the Private Attorneys General Action (“PAGA”). (Lab. Code, § 2699, subd. (s)(2).) The trial court must “determine independently whether a PAGA settlement is fair and reasonable,” to protect “the interests of the public and the LWDA in the enforcement of state labor laws.” (Moniz v. Adecco USA, Inc. (2021) 72 Cal.App.5th 56, 76- 77.) A PAGA settlement may be substantially discounted, and courts often exercise their discretion to award PAGA penalties below the statutory maximum. (Carrington v. Starbucks Corp. (2018) 30 Cal.App.5th 504, 529; Amaral v. Cintas Corp. No. 2 (2008) 163 Cal.App.4th 1157, 1213.)

VI. Discussion of the Proposed Settlement

A. Provisions of the Settlement

This case has been settled on behalf of the following class: all persons who worked for Defendant in California as an hourly-paid or non-exempt employee during the Class Period of November 1, 2017, to May 19, 2023. (MOU, ¶¶ 9–10.) The settlement includes a subset group of PAGA Aggrieved Employees, defined as all persons employed by Defendant in California as hourly-paid or non-exempt employees during the PAGA Period of October 1, 2020, to May 19, 2023. (Id. at ¶ 12.)

Defendant will pay a gross settlement amount of $625,000. The gross settlement amount includes attorney fees of up to one-third of the gross settlement amount ($208,333.33); litigation costs of up to $20,000; a PAGA allocation of $30,000 (75 percent of which, or $22,500, will be paid to the LWDA, and 25 percent of which, or $7,500, will be paid to Aggrieved Employees as individual PAGA payments); a service payment of up to $10,000; and settlement administration costs of up to $15,000. (MOU, ¶¶ 5, 11–14.) No portion of the gross settlement amount will revert to Defendant. (Id. at ¶ 5.)

Plaintiff’s counsel obtained several bids for settlement administration services, and selected Apex Class Action Administration (“Apex”) because it presented the lowest bid. (Wilcox Decl., ¶ 11.) The Court appoints Apex as the settlement administrator. Funds from checks remaining uncashed after the void date will be remitted to the Little Italy San Jose Foundation as the designated cy pres recipient pursuant to Code of Civil Procedure section 384. (Id. at ¶ 16.) The Court approves the cy pres designation.

In exchange for the settlement, the class members agree to release Defendant and related entities and persons from the wage-and-hour and unfair-competition claims that were asserted, or that could have been asserted on the same facts, in the operative complaint. (MOU, ¶ 8.) PAGA Aggrieved Employees will be deemed to release Defendant and related entities and persons from the PAGA claims arising from the same facts during the PAGA Period. (Id. at ¶ 12.) The release provisions are appropriately tailored to the factual allegations of the operative pleading. (See Amaro v. Anaheim Arena Management, LLC (2021) 69 Cal.App.5th 521, 538.)

B. Fairness of the Settlement

Plaintiff contends that the Agreement meets the standards for preliminary approval. (Motion, pp. 9–11.) Plaintiff’s counsel states that the parties participated in mediation with Mark LeHocky. (Wilcox Decl., ¶ 7.) Prior to mediation, Defendant produced sample timekeeping and payroll records and information regarding its wage-and-hour policies, which Plaintiff’s counsel analyzed with the assistance of forensic accountants and a statistics expert. (Id. at ¶¶ 5–6, 16.)

According to the analysis by Plaintiff’s counsel, Defendant’s estimated total maximum exposure for all claims is approximately $28 million, and Defendant’s estimated realistic exposure for all claims, after accounting for the risks of certification and trial, is approximately $1,235,009.59. (Id. at ¶¶ 17–22; Motion, p. 6.) The gross settlement amount of $625,000 represents approximately 50.6 percent of Defendant’s estimated realistic exposure, and approximately 2.3 percent of the estimated theoretical maximum. A recovery of approximately half of the realistically recoverable damages is within the general range of percentage recoveries that California courts have found to be reasonable. The estimated net settlement amount available to the class is approximately $346,416.67, yielding an average payment of approximately $482 per class member. (Wilcox Decl., ¶ 25.)

The Court has reviewed Plaintiff’s written submissions and is satisfied that the settlement is fair and may be preliminarily approved.

C. Service Award, Fees, and Costs

Plaintiff seeks a service award of up to $10,000 and has provided a declaration describing his participation in this action. The Court is inclined to approve a service award and will issue its determination regarding the approved amount at the final approval hearing. Class counsel will seek attorney fees of up to one-third of the gross settlement amount. Prior to the final approval hearing, class counsel shall submit lodestar information (including hourly rate and hours worked), as well as evidence of actual litigation costs incurred and settlement administration costs.

D. Conditional Certification of the Class

Plaintiff requests that the class be conditionally certified for purposes of the settlement, and the parties have stipulated to certification for settlement purposes only. (MOU, ¶ 4.) California Code of Civil Procedure section 382 authorizes certification of a class “when the question is one of a common or general interest, of many persons, or when the parties are numerous, and it is impracticable to bring them all before the court.”

Plaintiff states that there are approximately 718 class members who can be identified from a review of Defendant’s records. The Court finds that there are common questions regarding whether class members were subjected to the allegedly unlawful wage-and-hour practices, and that the proposed class may be conditionally certified for settlement purposes. The certification is conditional and, pursuant to the parties’ stipulation, will be revoked without prejudice if the settlement is not finally approved.

E. Class Notice

California Rules of Court, rule 3.769, subdivision (f), provides that, if the court has certified the action as a class action, notice of the final approval hearing must be given to the class members in the manner specified by the court, and the notice must explain the proposed settlement and the procedures for class members to file written objections and to appear at the settlement hearing.

Here, the form of the notice is generally adequate subject to the modifications set forth below. It describes the lawsuit, explains the settlement, and states the settlement amounts, including attorney fees and the payment to the named plaintiff. The notice informs class members that they may appear at the final fairness hearing to make an oral objection without filing a written objection.

The notice requires the following modifications before mailing. First, the second page of the notice is misleading because it suggests that recipients have only two basic options under the settlement: to do nothing or to opt out. This portion of the notice must be modified to clarify that recipients have a third option: to object. Second, because Defendant represents that approximately 85 percent of its workforce is Spanish-speaking, the notice must be translated into Spanish, and both the English and Spanish versions must be mailed to the class so that the notice is reasonably calculated to reach the class members.

Third, the figures and terms stated in the notice must be conformed to the MOU, including the identity of the settlement administrator and the amounts allocated to fees, costs, the service award, administration, and PAGA. Fourth, the following language regarding the final approval hearing shall be added to the notice: Class members may appear at the final approval hearing in person or remotely using the link for Department 5 (Afternoon Session), and should review the remote appearance instructions beforehand: https://santaclara.courts.ca.gov/online-services/remote-hearings Class members who wish to appear remotely are encouraged to contact class counsel at least three days before the hearing, if possible, so that potential technology or audibility issues can be avoided or minimized.

On the condition that the parties make the above changes to the notice prior to its mailing, the notice is approved.

VII.

Conclusion

Having considered and rejected the arguments raised by Defendant in opposition, the Court GRANTS the motion for preliminary approval, VACATES the Case Management Conference set for 2:30 p.m. on July 1, 2026, and sets a final approval hearing for January 13, 2027, at 1:30 p.m. in Department 5. Plaintiff shall prepare the order in accordance with California Rules of Court, rule 3.1312.

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