Fraize v. Johal, et al.

“PAGA settlements are subject to trial court review and approval, ensuring that any negotiated resolution is fair to those affected.” (Williams v. Superior Court (2017) 3 Cal.5th 531, 549, citing Labor Code section 2699(s)(2): “The superior court shall review and approve any settlement of any civil action filed pursuant to this part. The proposed settlement shall be submitted to the agency at the same time that it is submitted to the court.”)

[A] 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. (See Williams, supra, 3 Cal.5th at p. 546, 220 Cal.Rptr.3d 472, 398 P.3d 69 [PAGA “sought to remediate present violations and deter future ones”]; Arias, supra, 46 Cal.4th at p. 980, 95 Cal.Rptr.3d 588, 209 P.3d 923 [the declared purpose of PAGA was to augment state enforcement efforts to achieve maximum compliance with labor laws].) (Moniz v. Adecco USA, Inc. (2021) 72 Cal.App.5th 56, 77.)

“Thus, while PAGA does not require the trial court to act as a fiduciary for aggrieved employees, adoption of a standard of review for settlements that prevents “ ‘ “ ‘fraud, collusion or unfairness’ ” ’ ” (Dunk, supra, 48 Cal.App.4th at pp. 1800–1801, 56 Cal.Rptr.2d 483), and protects the interests of the public and the LWDA in the enforcement of state labor laws is warranted. Because many of the factors used to evaluate class action settlements bear on a settlement's fairness—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—these factors can be useful in evaluating the fairness of a PAGA settlement.” (Moniz, supra, (2021) 72 Cal.App.5th 56, 77.)

Under the general provisions of the PAGA scheme, 65% of the civil penalties recovered goes to the state while the remaining amount is given to the aggrieved employees. (Lab. Code, § 2699, subd. (m).) Here, 65% of the settlement amount, after deduction administration expenses, is to be paid to the LWDA.

1. Notice to LWDA

The moving party has given notice of the settlement to the LWDA, so it may address the court regarding it, if it so chooses. (Lab. Code, § 2966, subd. (s)(2); Horlacher Decl., ¶ 14.)

2. Fairness of the settlement amount

As mentioned above, the Court of Appeal in Moniz v. Adecco USA, Inc., supra, 72 Cal.App.5th 56 stated that the trial court should review PAGA settlements to determine whether they are fair, adequate and reasonable. (Moniz, supra, at pp. 75-77.) “Because many of the factors used to evaluate class action settlements bear on a settlement's fairness—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 9

amount—these factors can be useful in evaluating the fairness of a PAGA settlement.” (Id. at p. 77.)

“Given PAGA's purpose to protect the public interest, we also agree with the LWDA and federal district courts that have found it appropriate to review a PAGA settlement to ascertain whether a settlement is fair in view of PAGA's purposes and policies. We therefore hold that a 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.” (Ibid, internal citations and footnote omitted.)

a. Strength of the Case

Plaintiff’s action was initiated as an individual retaliation, wage and hour and wrongful termination action with the PAGA cause of action. The parties exchanged formal discovery, including over 3,000 pages of documents and sampling of biweekly payroll data, prior to mediation. At mediation plaintiff’s counsel reviewed financial documents indicating defendants’ limited ability to pay any settlement or judgment. Defendant’s verified discovery responses asserted there was no insurance coverage for the claims in the complaint. In light of this information the parties accepted the mediator’s proposal.

Plaintiff argues the settlement is reasonable in light of the reasonable defenses asserted by defendants, difficulty proving increased penalties for “malicious, fraudulent, or oppressive” conduct, and the substantial risks that proceeding to trial would result in significantly increased costs with no change in defendants’ limited ability to pay any settlement or verdict. The settlement was reached at the point in litigation where each side could agree to settle the claim and bear their own costs and attorney’s fees.

The discussion of the strengths and weaknesses of the case demonstrates that acceptance of the settlement terms is reasonable under the circumstances and especially so where the parties are bearing their own costs and fees.

b. Stage of the Proceeding

A presumption of fairness exists where the settlements is reached through arm’s length mediation between adversarial parties, where there has been investigation and discovery sufficient to allow counsel and the court to act intelligently, and where counsel is experienced in similar litigation. (Dunk v. Ford Motor Company (1996) 48 Cal. App 4th 1794, 1802.) Here, the case settled after the parties exchanges formal discovery and supplemental discovery and the parties attended a full day mediation. Plaintiff’s counsel is experienced in wage and hour litigation.

These factors weigh in favor of approving the settlement.

c. Risks of Litigating Case through Trial

Counsel notes that the parties both recognized the cost, time, and delay in the continued litigation PAGA claim was unlikely to result in a higher settlement offer. 10

Defendant’s inability to pay a greater amount whether in settlement or judgment appears to have been a significant factor in plaintiff’s determination to limit their costs and settle.

d. Amount of Settlement

The gross settlement is $15,000, and to assess the reasonableness of this amount, the court would need a good valuation of the total potential penalties. Here, the settlement’s full potential value was not calculated because the settlement amount better reflects defendants’ ability to pay a settlement rather than a fair amount of the potential value of the claim.

e. Experience and Views of Counsel

Plaintiff’s counsel are experienced in employment litigation. The declaration does not explicitly state counsel’s opinion that the settlement is fair, adequate and reasonable under the circumstances.

f. Government Participation

No government entity participated in the case, so this factor does not favor either approval or disapproval of the settlement.

g. Attorney’s Fees and Costs

The settlement agreement provides that plaintiff’s counsel will not be paid fees or costs from the PAGA settlement and will provide services necessary to effectuate the agreement pro bono. (Settlement Agreement, ¶ 2.2.2.) The only costs to be paid from the settlement is the settlement administration fees. The pastires have engaged Phoenix Class Action Administration Solutions who have agreed to provide the administration services for $2,750. (Horlacher Decl., Ex. J.)

Labor Code section 2699, subdivision (k)(1) states that the prevailing employee “shall be entitled to an award of reasonable attorney’s fees and costs.” The plaintiff’s foregoing the award of fees under these circumstances to ensure maximum PAGA penalties from the settlement are distributed to the LWDA and aggrieved employees weighs heavily in favor of approving the settlement.

h. Scope of the release

... PAGA's statutory scheme and the principles of preclusion allow, or “authorize,” a PAGA plaintiff to bind the state to a judgment through litigation that could extinguish PAGA claims that were not specifically listed in the PAGA notice where those claims involve the same primary right litigated. Because a PAGA plaintiff is authorized to settle a PAGA representative action with court approval (§ 2699, (l)(2)), it logically follows that he or she is authorized to bind the state to a settlement releasing claims commensurate with those that would be barred by res judicata in a subsequent suit had the settling suit been litigated to judgment by the state. 11

(Moniz v. Adecco USA, Inc. (2021) 72 Cal.App.5th 56, 83.)

Here, the settlement agreement provides that the following claims would be released:

[E]ach Aggrieved Employee releases Defendants from all claims for civil penalties under PAGA during the PAGA Period. The release is limited to claims for civil penalties under PAGA during the PAGA Period and does not release any individual Labor Code claims or claims that cannot be released as a matter of law. (Horlacher Decl., Exh. H, Settlement Agreement, ¶ 4.2.)

The release is appropriately limited to those claims of which the LWDA was given notice.

Pursuant to California Rules of Court, rule 3.1312(a), and Code of Civil Procedure section 1019.5, subdivision (a), no further written order is necessary. The minute order adopting this tentative ruling will serve as the order of the court and service by the clerk will constitute notice of the order.

Tentative Ruling

Issued By: lmg on 5-8-26. (Judge’s initials) (Date)

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