Ramirez v. California Commercial Solar, Inc.

[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 4

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.)

As of July 1, 2024 Labor Code section 2699, subdivision (m) was amended to provide a greater share of PAGA penalties to the aggrieved employees, 65% of the penalties recovered going to the state and the remaining 35% given to the aggrieved employees. The complaint was filed on October 1, 2024, after this amendment went into effect. The moving papers do not address the decision to allocate the penalties under the former version of the statute rather than the version effective at the time the operative complaint was filed.

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. (l)(2); see Rose Decl., Exhs. C.)

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 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 a wage and hour class action with the PAGA cause of action. Plaintiff argues the settlement is reasonable and will redress the alleged civil code violations experienced by the approximately 62 PAGA members. In preparation for mediation, plaintiffs’ counsel obtained the number of aggrieved employees, plaintiffs’ personnel files, and an anonymized list of employees during the PAGA period. (Rose Decl., ¶ 8.) Counsel determined the maximum exposure was $549,000, but that, based on risks, a more realistic maximum would be $274,500. (Id. at ¶ 9.) The moving papers provide no evidence to support the estimated maximum penalty exposure. There is no evidence to support the estimated number of PAGA members. Plaintiff has provided no evidence to support the conclusion that the settlement is reasonable.

Regarding weaknesses of the claims, plaintiff notes the missed breaks and off-theclock work may be limited to plaintiffs’ personal experiences as there was no evidence of a systematic prevention of taking breaks or off-the-clock work. (Id. at ¶¶ 10-11.) There was also a risk that a finding could be made that any violations were not willful. (Id. at ¶ 12.) The memorandum of points and authorities also indicated a class action settlement, with a PAGA claim, was made October 19, 2018, which lead defendants to ameliorate previously noted violations. This conclusory, generalized discussion provides little to assist in determining whether the settlement is reasonable.

The discussion of the strengths and weaknesses of the case is conclusory and insufficient to justify a settlement in any amount.

b. Stage of the Proceeding

A presumption of fairness exists where the settlement 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 attended mediation. Plaintiff’s counsel is experienced in representative litigation.

Plaintiff attests to the settlement as a product of arm’s-length negotiations occurring thought out the litigation and resulting in a settlement amount that reflects the best feasible recovery. (Rose Decl. ¶ 3.)

Regarding pre-settlement discovery, counsel states that defendant provided the number of aggrieved employees, plaintiffs’ personnel files, and an anonymized list of 6

employees during the PAGA period. (Id. at ¶ 8.) There is no indication of formal discovery having been undertaken or whether interviews were conducted of employees other than plaintiffs to determine whether the violations were as widespread as alleged.

The case settled after a mediation session, and plaintiffs’ counsel is experienced in representative litigation such as this. However, the pre-settlement discovery or information exchange appears to have been limited. Additionally, there is no discussion that any expert was consulted.

c. Risks of Litigating Case through Trial

Counsel notes that the risk of litigation was primarily as to plaintiffs.

d. Amount of Settlement

The gross settlement is $75,000, and to assess the reasonableness of this amount, the court needs a good valuation of the total potential penalties. Here, counsel addresses the fairness of the settlement in the context of the $10,000 intended to compensate for the PAGA claim. Counsel argues this amount represents 1.8 percent of the maximum exposure and 7.2 percent of the realistic exposure. However, there is limited foundation provided for the range of potential exposure presented by plaintiffs’ counsel.

e. Experience and Views of Counsel

Plaintiffs’ counsel is experienced in class and representative litigation. He has stated that the settlement is fair, adequate and reasonable under the circumstances. Therefore, this factor weighs in favor of approval.

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 would get up to $26,250 (35 percent of the total gross recovery) in attorney’s fees, plus costs of up to $6,000. Plaintiff’s actual costs are $5,888.61. (Rose Decl., Exh. D.)

Courts have approved awards of fees in class actions that are based on a percentage of the total common fund recovery. (Laffitte v. Robert Half Internat. (2016) 1 Cal.5th 480, 503.) It appears that the same reasoning would apply to PAGA settlements, which bear similarities to class actions. However, the court may also perform a lodestar calculation to double check the reasonableness of the fee request. (Laffitte, supra, at pp. 504-506.) Labor Code section 2699, subdivision (g)(1) states that the prevailing employee “shall be entitled to an award of reasonable attorney’s fees and costs.”

Records by counsel of the time actually spent on a matter are the starting point for any lodestar determination. (Horsford v. Board of Trustees (2005) 132 Cal. App. 4th 359, 394.)

A court assessing attorney’s fees begins with a touchstone or lodestar figure, based on the ‘careful compilation of the time spent and reasonable hourly compensation of each attorney . . . involved in the presentation of the case." Serrano v. Priest (Serrano III) (1977) 20 Cal.3d 25, 48. As our Supreme Court has repeatedly made clear, the lodestar consists of "the number of hours reasonably expended multiplied by the reasonable hourly rate. . . ." PLCM Group, Inc. v. Drexler (2000) 22 Cal. 4th 1084, 1095, italics added; Ketchum v. Moses (2001) 24 Cal.4th 1122, 1134.)

Reasonable hourly compensation is the "hourly prevailing rate for private attorneys in the community conducting noncontingent litigation of the same type" (Ketchum v. Moses, supra, 24 Cal.4th at p. 1133.) Here, the fee request is 35 percent of the total gross settlement, which does not appear to be unreasonable. Rose declares having spent about 100 hours on this case and having a billing rate of $850 per hour. (Rose Decl., ¶ 16.) No billing records were attached.

Before any reduction in hourly rates to better match local counsel rates the lodestar is more than the fees requested. In the context of using the lodestar method to cross-check attorney fees in a class action settlement, a multiplier can be used to increase or decrease the award “to take into account a variety of other factors, including the quality of the representation, the novelty and complexity of the issues, the results obtained, and the contingent risk presented.” (Laffitte v. Robert Half Internat. Inc., supra, 1 Cal.5th at p. 489, internal citation omitted.) Here, no multiplier is requested. However, the moving papers do not include evidence in support of the use of the requested billing rates rather than rates that better approximate those of local counsel.

The court’s approval of the costs of $6,000 is requested. Exhibit D to the Declaration of Rose is an expense ledger of costs for this action. The ledger reflects multiple entries for “One Legal Credit Card Sale” without describing what these represent. There is also an “EVE AI SERVICES” fee of $200. Counsel will need to address these.

h. Incentive Payment to Plaintiff

Raymundo Ramirez is to be paid $15,500 and Leonard Ramirez is to be paid $15,000 as individual settlements. While they are labeled as individual settlements, these appear to be akin to incentive payments. There is nothing in PAGA that specifically authorizes an additional incentive payment to the named plaintiffs. PAGA only authorizes awards of penalties to aggrieved employees based on actual violations of the Labor Code. (Labor Code § 2699(i).) It is unclear whether additional payments to named plaintiffs are proper in PAGA actions, although such payments are common in class actions. (Rodriguez v.

West Publishing Corp. (2009) 563 F.3d 948, 958.) “Given the potential for recovery of significant civil penalties if the PAGA claims are successful, as well as attorney fees and costs, plaintiffs have ample financial incentive to pursue the remaining representative claims under the PAGA . . ..” (Munoz v. Chipotle Mexican Grill, Inc. (2015) 238 Cal.App.4th 291, 311.)

The court intends to deny the requested individual settlement payments as it is not within the PAGA statutory scheme. To the extent the payments may be based upon plaintiffs’ general release of claims against their employer, although those individual claims for Labor Code violations may have value, the damages to which plaintiffs may be entitled are distinct from civil penalties recovered on behalf of the state under PAGA. (Iskanian v. CLS Transportation Los Angeles, LLC (2014) 59 Cal.4th 348, 381, overruled on other grounds by Viking River Cruises, Inc. v. Moriana (2022) 596 U.S. 639, 662; see also ZB, N.A. v. Superior Court (2019) 8 Cal.5th 175, 197.) A separate settlement of plaintiffs’ individual claims apart from the PAGA settlement is not subject to the court’s review but this is not how the parties have chosen to proceed at this time.

i. 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.

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

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

All Aggrieved Employees, the state of California, and the LWDA are deemed to release, on behalf of themselves and their respective former and present representatives, agents, attorneys, heirs, administrators, successors and assigns, the Released Parties from all claims for PAGA claims that were alleged, or reasonably could have been alleged, based on the facts stated in the Complaint and the PAGA Notice, and alleged in the Action, including but not limited to claims for all alleged Labor Code and Wage Order Violations specified therein. The settlement shall be effective to adjudicate and release the claims and/or rights of the LWDA to recover civil penalties against Cal Com for the released Labor Code and/or Wage Order violations suffered by any of the Aggrieved Employees (i.e., entry of Judgment shall have res judicata effect as to those claims of the LWDA, whether pursued directly by the LWDA or by a representative pursuant to PAGA).

(Rose Decl., Exh. A, PAGA Settlement Agreement, Section 5.2.)

A copy of the notice given to the LWDA was not included. Therefore, the court cannot determine whether the scope of the release is limited to the PAGA claims of which the LWDA was given notice and those supported by the allegations of the complaint.

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: KCK on 05/11/26. (Judge’s initials) (Date)

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