Anthony Bizzle vs. Cypress Healthcare Group, LLC

Number: 34-2021-00310054 (except as it pertains to Defendants C.O.N.R., Inc.; S.L.H.C.C., Inc.; and S.H.C.C., Inc.) (“Loera”); and (4) Anthony Bizzle v. Asbury Park Nursing & Rehabilitation; Cypress Healthcare Group, LLC; Sacramento Superior Court Case Number 34 2021- 00311500 (“Bizzle 3”).

On August 16, 2021, Plaintiff Bizzle filed the Bizzle 1 action, including claims for (1) unpaid overtime; (2) unlawful meal periods; (3) unlawful rest periods; (4) unpaid minimum wages; (5) failure to pay all final wages due; (6) failure to timely pay wages during employment; (7) wage statement violations; (8) failure to maintain required payroll records; (9) unreimbursed business expenses; and (10) unlawful business practices. (Matern Decl., ¶ 7.) On September 23, 2021, Plaintiff Bizzle filed the Bizzle 2 action, a separate representative action under the Private Attorneys General Act (“PAGA”) based on the underlying Labor Code violations described in the Bizzle 1 action. (Id., ¶ 8.) Then on November 22, 2021, Plaintiff Bizzle filed the Bizzle 3 action, which was based on the same underlying violations alleged in Bizzle 1, but against different Defendants. (Id., ¶ 9.)

Separately, on October 20, 2021, Plaintiff Loera filed a putative class and representative complaint against Defendants. (Matern Decl., ¶ 11.) The complaint alleged claims for: (1) failure to provide required meal periods; (2) failure to provide required rest periods; (3) failure to pay overtime wages; (4) failure to pay minimum wages due upon separation; (6) failure to furnish accurate itemized wage statements; (7) failure to indemnify employees for necessary business expenses; (8) unfair and unlawful business practices; and (9) penalties under the PAGA. (Ibid.)

On April 12, 2023, the Parties filed a First Amended Complaint in the Bizzle 1 action, which combined all parties and claims from the four underlying actions into a single pleading. (Matern Decl., ¶ 17.) The Parties expressly agreed that Plaintiff Loera will retain the right to continue to pursue her claims in the Loera Action against Defendants C.O.N.R., Inc., S.L.H.C.C., Inc. and S.H.C.C., Inc., who are not parties to the proposed Settlement. (Ibid.)

Plaintiff Loera now moves for preliminary approval of her Joint Stipulation of Class Action and PAGA Settlement and Release (“Settlement Agreement” or “Agreement”) with Defendants. (Matern Decl., ¶ 20, Exh. A (“SA”).) Plaintiff Loera provided a copy of the Agreement to the LWDA. (Id., ¶ 60, Exh. B.) As discussed below, Plaintiff Bizzle is not a party to the Agreement.

Legal Standard

The law favors the settlement of lawsuits, particularly in class actions and other complex

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cases where substantial resources can be conserved by avoiding the time, expense, and rigors of formal litigation. (See Neary v. Regents of Univ. of Cal (1992) 3 Cal.4th 273, 277-281; Lealao v. Beneficial California, Inc. (2000) 82 Cal.App.4th 19, 52.) However, a class action may not be dismissed, compromised, or settled without approval of the court, and the decision to approve or reject a proposed settlement is committed to the court’s sound discretion. (See Cal. Rules of Court, Rule 3.769; Wershba v. Apple Computer, Inc. (2001) 91 Cal.App.4th 224, 234-35 (Wershba).)

In determining whether to approve a class settlement, the court’s responsibility is to “prevent fraud, collusion or unfairness to the class” through settlement because the rights of the class members, including the named plaintiffs, “may not have been given due regard by the negotiating parties.” (Consumer Advocacy Group, Inc. v. Kintetsu Enters. of Am. (2006) 141 Cal.App.4th 46, 60.) The court must independently determine “whether the settlement is in the best interests of those whose claims will be extinguished” and “make an independent assessment of the reasonableness of the terms to which the parties have agreed.” (Kullar v.

Foot Locker Retail, Inc. (2008) 168 Cal.App.4th 116, 130, 133.) The burden of establishing the fairness and reasonableness of the settlement is on the proponent. (Wershba, supra, 91 Cal.App.4th at p. 245; see also 7-Eleven Owners for Fair Franchising v. Southland Corp. (2000) 85 Cal.App.4th 1135 1165-66.)

The Court does not rubber stamp these motions, but rather serves as a guardian of absent class members’ rights to ensure the settlement is fair. (Luckey v. Superior Court (2014) 228 Cal.App.4th 81, 95.) “Ultimately, the [trial] court’s determination is nothing more than ‘an amalgam of delicate balancing, gross approximations and rough justice.” (7-Eleven, supra, 85 Cal.App.4th at p. 1145.) “A settlement need not obtain 100 percent of the damages sought in order to be fair and reasonable. Compromise is inherent and necessary in the settlement process.

Thus, even if 'the relief afforded by the proposed settlement is substantially narrower than it would be if the suits were to be successfully litigated,' this is no bar to a class settlement because 'the public interest may indeed be served by a voluntary settlement in which each side gives ground in the interest of avoiding litigation.'” (Wershba, supra, 91 Cal.App.4th at p. 250, citations omitted.) The court’s primary objective for preliminary approval is to establish whether to direct notice of the proposed settlement to the class, invite the class’s reaction, and schedule a final fairness hearing. (Rubenstein et al., Newberg on Class Actions (6th ed. 2023) § 13:10.)

Summary of Settlement Agreement

Before approving a class action settlement, the Court must find that the settlement is “fair, adequate, and reasonable.” (Dunk v. Ford Motor Co. (1996) 48 Cal.App.4th 1794, 1801.) The Court considers such factors as “the strength of plaintiffs’ case, the risk, expense, complexity and likely duration of further litigation, the risk of maintaining class

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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 class members to the proposed settlement.” (Id.) “[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.” (Id. at p. 1802.)

Under the terms of the Settlement Agreement, Defendants agree to pay a nonreversionary Maximum Settlement Amount (“MSA”) of $2,540,000. (SA, § 1.9.) Defendants will separately pay any applicable employer-side payroll taxes. (Id., § 1.7.) Due to financial difficulties, the MSA will be paid in three installments. (SA, § 2.1; Matern Decl., ¶ 25.) The sum of one-third of the MSA ($846,666.67) will be deposited with the Settlement Administrator no later than 30 days, no later than 212 days, and no later than 395 days after the Court enters an order granting final approval of the Settlement. (SA, § 2.1.)

The following amounts will be paid from the GSA: 1. A Class Counsel Fees Payment in the amount of one-third of the MSA (or $846,666.67); 2. Reimbursement of Class Counsel’s litigation expenses of up to $30,000; 3. A Class Representative Service Payment in the amount of $10,000 to Plaintiff Loera; 4. Settlement administration costs not to exceed $30,000; 5. PAGA penalties in the amount of $150,000, which will be allocated 75% ($112,500) to the LWDA and 25% ($37,500) to the PAGA Employees.

(SA, §§ 1.23, 2.4(a)-(c).) The remaining amount – the Net Settlement Amount (“NSA”) – is approximately $1,473,333.33. (Id., § 1.18.)

Individual Class Settlement Awards will be calculated by dividing the Participating Class Member’s Individual Class Workweeks by the total number of Class Member Workweeks, and multiplying the resulting number by the NSA. (SA, § 2.6(b).) Similarly, Individual PAGA Settlement Payments will be calculated by dividing each PAGA Employee’s Individual PAGA Workweeks by the total number of PAGA Workweeks for all PAGA employees, and then multiplying the result by $37,500, or the PAGA Employees’ portion of the PAGA Penalties. (Id., § 2.6(a).)

To the extent that any Individual PAGA Settlement Payment and/or Individual Class Settlement Payment Award remains uncashed after 180 days from the date of issuance, any such undeliverable or uncashed checks will become null and void and the funds associated with any such uncashed checks will be distributed to the Controller of the State of California to be held pursuant to the Unclaimed Property Law for the benefit of those

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Class Members who did not cash their checks. (Id., § 2.8.)

Within 20 calendar days following preliminary approval, Defendants will provide the Settlement Administrator with the Class List. (SA, § 3.2.2.) No later than 30 calendar days after preliminary approval, the Settlement Administrator will mail the Class Notice to all Class Members. (Id., § 3.2.1.) For any Class Notices returned to the Settlement Administrator on or before the Response Deadline without a forwarding address, the Settlement Administrator will attempt to locate a correct address by the use of skiptracing or another type of automated search, and if an Updated Address is ascertained, will re-mail the Class Notice to the Class Member’s Updated Address within 3 business days.

In the event that any Class Notices are returned with a forwarding address, the Settlement Administrator will re-mail the Class Notice to the forwarding address provided within 3 business days. Class Members who are sent a re-mailed Class Notice shall have their Response Deadline extended by 10 calendar days from the date of the initial Response Deadline. (Id., § 3.2.5.) Otherwise, Class Members will have 60 days from the date of mailing to dispute the number of workweeks credited to them, submit written objections to the settlement, or opt-out of the settlement of the class claims. (Id., §§ 1.34, 3.3.1, 3.3.3, and 3.3.4.)

Each of the Individual Class Settlement Amount payments to Participating Class Members will be allocated as follows: 20% to satisfaction of claims for unpaid wages; 80% to the satisfaction of claims for interest and penalties. All settlement payments for wages shall be subject to required withholdings and deductions as W-2 wage payments. The Individual PAGA Settlement Payments to PAGA Employees are allocated as 100% penalties and shall also be issued through a 1099 form and not subject to withholdings or deductions. (SA, § 2.5.)

Upon the later of the Effective Date or the date upon which Defendants have completed funding the MSA, each Participating Class Member will be deemed to have released the “Released Class Claims.” (SA, § 3.5.1.) The “Released Class Claims” means “all claims, demands, rights, liabilities and causes of action of every nature and description whatsoever against the Released Parties, and any of them, that were alleged, or reasonably could have been alleged, based on the facts during the Class Period stated in the operative complaints in Bizzle Matter 1, which arose at any time during the Class Period, including but not limited to, claims for failure to pay for all hours worked (including minimum wages and overtime), failure to provide meal periods, failure to authorize and permit rest periods, failure to timely pay wages during employment, failure to timely pay final wages at termination, failure to furnish accurate itemized wage statements, failure to maintain accurate payroll records, failure to reimburse business expenses, and all damages, interest, penalties, attorneys’ fees, costs, and other associated penalties.

The release does not extend to any claims not alleged in the operative Complaint in Bizzle Matter 1, and specifically excludes claims for workers’

SUPERIOR COURT OF CALIFORNIA COUNTY OF SACRAMENTO

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compensation, personal injuries, unemployment insurance, state disability compensation, claims under the Employment Retirement Income Security Act of 1974, previously vested benefits under any employer sponsored benefits plan, wrongful termination, discrimination, retaliation, and harassment including but not limited to those arising under the Age Discrimination In Employment Act, the California Fair Employment and Housing Act, Title VII of the Federal Civil Rights Act of 1964, and/or Federal Civil Rights Act of 1991, or any similar state or federal laws, the California Family Rights Act, the Federal Family Medical Leave Act, the California Pregnancy Leave Law, or similar state or federal laws, the Federal Equal Pay Act of 1963, violations of the Americans with Disabilities Act of 1990 or violations of any other state or federal law, rule or regulation concerning discrimination, retaliation and/or harassment.” (Id., § 1.31.)

Similarly, upon the later of the Effective Date or the date upon which Defendants have completed funding the MSA, the PAGA Employees will be deemed to release the “Released PAGA Claims.” (SA, § 3.5.2.) The “Released PAGA Claims” means “all claims for civil penalties under the PAGA alleged against the Released Parties in the operative complaints in the Litigation, along with all claims that could have been alleged based on the facts alleged in the operative complaints in the Litigation and the Plaintiffs’ PAGA notices to the LWDA, which arose at any time during the PAGA Period, including claims for failure to properly pay wages for all hours worked (including minimum and overtime wages), failure to provide meal periods, failure to authorize and permit rest periods, failure to timely pay wages during employment, failure to timely pay final wages at termination, failure to keep accurate payroll records, failure to reimburse business expenses, and failure to furnish accurate itemized wage statements.” (Id., § 1.32.)

Only Plaintiff Loera, as the Class Representative, is subject to a general release. (SA, § 3.5.3.)

Issues to Address:

1. LWDA Notice: Counsel attests that Plaintiff Loera submitted/sent a notice to the LWDA and Defendants in compliance with PAGA on June 25, 2021. (Marten Decl., ¶ 10.) Counsel similarly attests that on July 19, 2021 and subsequently on September 17, 2021, Plaintiff Bizzle provided separate notices to the LWDA and Defendants. (St. John Decl., ¶ 9.) However, none of these LWDA Notices are provided. Plaintiffs shall provide copies of all LWDA Notices in this matter.

2. Structure of Agreement: Here, the Agreement is between Plaintiff Loera and Defendants. Plaintiff Bizzle is not a party to the Agreement, does not sign the Agreement, and is apparently not designated as a Class Representative despite being a named Plaintiff in the operative, omnibus complaint and the first Plaintiff to file these

SUPERIOR COURT OF CALIFORNIA COUNTY OF SACRAMENTO

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claims against Defendant. (See generally, SA.) However, Plaintiff Bizzle’s Counsel – Lawyers for Justice, PC – is designated as Class Counsel and apparently entitled to a portion of the attorneys’ fee award. (SA, § 1.2.) The Court is aware that Counsel had difficulty obtaining Plaintiff Bizzle’s signature, which necessitated several continuances of this motion. (See 6-21-23 Joint Stipulation, 9-25-23 Joint CMC Statement, 10-26-23 Joint Stipulation, 12-27-23 Joint Stipulation.) However, those representations necessarily suggest that Plaintiff Bizzle was a party to the Agreement.

In fact, they repeatedly described the motion as being filed by Plaintiffs, plural. The Parties must explain why only Plaintiff Loera is moving for preliminary approval, why Plaintiff Bizzle is not a party to the Agreement presented to the Court, and, most critically, how the Court can approve a settlement that is not executed by all Parties.

3. Exposure Analysis: In moving for preliminary approval, a plaintiff must provide specific information sufficient for the Court to evaluate whether the consideration being received for the release of class members’ claims is reasonable in light of the strengths and weaknesses of the claims and the risks of the particular litigation. (Kullar v. Foot Locker Retail, Inc. (2008) 168 Cal.App.4th 116, 129; Munoz v. BCI Coca-Cola Bottling Co. of Los Angeles (2010) 186 Cal.App.4th 399, 409.) This discussion should specify the maximum realistic recovery of each claim asserted in the operative complaint, defenses asserted by defendant(s), a summary of the risks, expenses, and duration of further litigation if the settlement is not approved, and any other relevant factors justifying the amount offered in settlement.

Here, Plaintiff Loera estimates that Defendants’ maximum potential damages and penalties are approximately $101,630,059, representing a “best possible case scenario” and provides a breakdown of her Counsel’s valuation. (Marten Decl., ¶ 22.) Specifically, Plaintiff Loera estimates the total unpaid rest period premiums to be $14,169,973.40 (based on a violation rate of 1, 5 shifts per week, 127,028 workweeks in the class period, and an average rate of pay of $22.31). (Id., ¶ 22(A).) She estimates the total unpaid meal break premiums to be $4,180,142.15 (based on a violation rate of 0.30, 5 shifts per week, 127,028 workweeks in the class period, and an average rate of pay of $22.31). (Id., ¶ 22(B).)

She estimates the total unpaid regular rate claims to be to be $379,667 (consisting of $139,830 in sick pay wages, $212,550 in overtime wages, and $27,287 in meal premiums). (Id., ¶ 22(C).) She estimates the total waiting time penalties to be $1,074,226.50 (based on 1,605 former employees, an average hourly rate of $22.31, 5 hours per day, and the statutory period of 30 days); the total records penalties to be $1,250,000 (based on 2,500 employees and a $500 penalty); and the total wage statement penalties to be $10,000,000 (based on 2,500 employees and a $4,000 penalty). (Id., ¶ 22(D).)

Finally, Plaintiff Loera estimated a total PAGA exposure of $70,576,050, including $3,643,950 for overtime compensation penalties, $9,066,150 for regular compensation penalties, $36,002,250 for wage statement penalties, $7,287,900 for meal period penalties, $7,287,900 for rest break penalties, and $7,287,900 for

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business expense reimbursement penalties. (Id., ¶ 22(E).) Here, the MSA represents only 2.49% of Defendants’ maximum total exposure. The PAGA allocation represents only 0.21% of Defendants’ maximum PAGA exposure.

Plaintiff Loera fails to provide any explanation of the methodology for her “unpaid regular rate claims.” (Marten Decl., ¶ 22(C).) Moreover, her estimate of total waiting time penalties appears to be substantially inconsistent with the underlying assumptions provided. (Id., ¶ 22(D).) Plaintiff Loera generally describes the risks associated with litigation (id., ¶¶ 23-26 [including “the substantial risks entailed by the Action,” the “significant risk that this Court may deny class certification,” and the “uncertainty involved” in ongoing litigation]); however, Plaintiff Loera fails to provide a realistic exposure estimate or quantify any reductions applied to Defendants’ maximum exposure for settlement purposes. Plaintiff Loera must provide this information.

4. Class Notice: Plaintiffs’ proposed Notice to the Class fairly apprises the Class Members of the terms of the proposed settlement and their rights as prospective class members. (SA, Exh. 1 (“Notice”).) However, the following issues must be addressed:  The proposed Notice includes the following language: “Both sides agree that, in light of the risks and expenses associated with continued litigation, this Settlement is fair, adequate, and reasonable. Plaintiff also believes this Settlement is in the best interests of all Settlement Class Members.” (Notice, p. 2.)

The Court finds this language is unnecessary and may improperly discourage class members from objecting to the settlement. Accordingly, it must be removed.  While the Notice provides for an estimate of the Class Member’s individual class settlement payment based on the number of workweeks they worked, it does not provide an estimate of their PAGA workweeks or individual PAGA settlement payment. (See id., p. 3.) The Notice should also include this information.  The Notice incorrectly states that the settlement administration costs will not exceed $20,000. (Id., p. 4.)

This should be revised to be consistent with the terms of the Agreement.  The “How can I get additional information?” section incorrectly includes the website for Ventura County Superior Court. (Id., p. 6.)

5. Class Counsel Fees: Here, the Agreement provides for an award of class counsel fees in the amount of one-third of the MSA (or $846,666.67) and the reimbursement of Counsels’ actual litigation costs up to $30,000. (SA, § 2.4(b).) However, Counsel does not address how the requested fee award will be divided. Counsel must provide information regarding the fee splitting agreement and whether Plaintiffs have given written approval of any such agreement. (Mark v. Spencer (2008)

SUPERIOR COURT OF CALIFORNIA COUNTY OF SACRAMENTO

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166 Cal.App.4th 219, RPC Rule 1.5.1; CRC Rule 3.769.) The Court is especially concerned about whether Plaintiff Bizzle is aware of and has consented to any fee splitting agreement.

This minute order is effective immediately. No formal order pursuant to CRC Rule 3.1312 or further notice is required.

To request oral argument on this matter, you must call Department 22 at (916) 874- 5762 by 4:00 p.m., the court day before this hearing and notification of oral argument must be made to the opposing party/counsel. If no call is made, the tentative ruling becomes the order of the court. (Local Rule 1.06.)

Parties requesting services of a court reporter may arrange for private court reporter services at their own expense, pursuant to Government code §68086 and California Rules of Court, Rule 2.956. Requirements for requesting a court reporter are listed in the Policy for Official Reporter Pro Tempore available on the Sacramento Superior Court website at https://www.saccourt.ca.gov/court-reporters/docs/crtrp-6a.pdf. The list of Court Approved Official Reporters Pro Tempore is available at https://www.saccourt.ca.gov/court-reporters/docs/crtrp-13.Pdf.

Please check your tentative ruling prior to the next Court date at www.saccourt.ca.gov prior to the above referenced hearing date.

If oral argument is requested, the Parties are encouraged to appear via Zoom with the links below:

To join by Zoom Link - https://saccourt-ca-gov.zoomgov.com/my/sscdept22 To join by phone dial (833) 568-8864 ID 16184738886

Counsel for Plaintiff is directed to notice all parties of this order.

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