Loveless v. Essential Behavioral Support, Inc.

II. LEGAL STANDARD A. Class Action Generally, “questions whether a [class action] 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 (Wershba),

disapproved of on other grounds by Hernandez v. Restoration Hardware, Inc. (2018) 4 Cal.5th 260.) In determining whether a class settlement is fair, adequate and reasonable, the trial court should consider relevant factors, such as the strength of plaintiffs’ case, the risk, expense, complexity and likely duration of further litigation, the risk of maintaining class 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 the class members to the proposed settlement. (Wershba, supra, 91 Cal.App.4th at pp. 244-245, internal citations and quotations omitted.)

In general, 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 (Kullar).) But the trial court is free to engage in a balancing and weighing of factors depending on the circumstances of each case. (Wershba, supra, 91 Cal.App.4th at p. 245.) The trial court must examine the “proposed settlement agreement to the extent necessary to reach a reasoned judgment that the agreement is not the product of fraud or overreaching by, or collusion between, the negotiating parties, and that the settlement, taken as a whole, is fair, reasonable and adequate to all concerned.” (Ibid., citation and internal quotation marks omitted.)

The burden is on the proponent of the settlement to show that it is fair and reasonable. However, “a presumption of fairness exists where: (1) the settlement is reached through arm’slength 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.” (Wershba, supra, 91 Cal.App.4th at p. 245, citation omitted.) B. PAGA Labor Code section 2699, subdivision (l)(2) provides that “[t]he superior court shall review and approve any settlement of any civil action filed pursuant to” PAGA.

The court’s review “ensur[es] that any negotiated resolution is fair to those affected.” (Williams v. Superior Court (2017) 3 Cal.5th 531, 549.) Seventy-five percent of any penalties recovered under

PAGA go to the Labor and Workforce Development Agency (LWDA), leaving the remaining twenty-five percent for the aggrieved employees. (Iskanian v. CLS Transportation Los Angeles, LLC (2014) 59 Cal.4th 348, 380, overruled on other grounds by Viking River Cruises, Inc. v. Moriana (2022) 596 U.S. 639.) Like its review of class action settlements, the 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.) It must make this assessment “in view of PAGA’s purposes to remediate present labor law violations, deter future ones, and to maximize enforcement of state labor laws.” (Id. at p. 77; see also Haralson v. U.S. Aviation Servs. Corp. (N.D. Cal. 2019) 383 F. Supp. 3d 959, 971 [“when a PAGA claim is settled, the relief provided for under the PAGA [should] be genuine and meaningful, consistent with the underlying purpose of the statute to benefit the public ....”], quoting LWDA guidance discussed in O’Connor v.

Uber Technologies, Inc. (N.D. Cal. 2016) 201 F.Supp.3d 1110 (O’Connor).) The settlement must be reasonable considering the potential verdict value. (See O’Connor, supra, 201 F.Supp.3d at p. 1135 [rejecting settlement of less than one percent of the potential verdict].) But a permissible settlement may be substantially discounted, given that courts often exercise their discretion to award PAGA penalties below the statutory maximum even where a claim succeeds at trial. (See Viceral v. Mistras Group, Inc. (N.D.

Cal., Oct. 11, 2016, No. 15-cv-02198-EMC) 2016 WL 5907869, 2016 U.S. Dist. LEXIS 140759, at *20-24.) III. DISCUSSION A. Provisions of the Settlement Plaintiff moves for approval of a proposed settlement made on behalf of: [A]ll current and former hourly, non-exempt employees employed by Defendant, in the State of California during the Class Period [September 20, 2020 through the day the Court grants preliminary approval of the Settlement.] (See Declaration of J.D. Gomez, Ex. 1 [“Agreement”], §§ 1.5, 1.14.)

The settlement also includes a subset PAGA class of aggrieved employees defined as “all current and former hourly, non-exempt employees employed by Defendant in the State of California during the

PAGA period [September 20, 2023 through the day the Court grants preliminary approval of the Settlement.]” (Id. at §§ 1.4, 1.34.) Defendant will pay a gross settlement amount of $512,500.00. This amount includes: (1) the net settlement amount; (2) individual class payments; (3) individual PAGA payments; (4) PAGA penalties in the amount of $25,625.00 (35% of which will go to the aggrieved employees and 65% of which will go to the LWDA); (5) class counsel fees of up to one-third of the gross settlement amount, or $170,833.33; (6) class counsel expenses not to exceed $25,000.00; (7) class representative service payment; and (8) administrator’s expenses not to exceed $10,000.00.1 The individual class payment will be distributed to participating class members on a pro rata basis according to the number of workweeks they worked during the class period.

The individual PAGA payments will be distributed to aggrieved employees on a pro rata basis according to the number of PAGA pay periods worked during the PAGA period. In exchange for the settlement, the class members agree to release Defendant and related entities and persons “all claims arising during the Class Period which were asserted against Defendant in the Operative Complaint filed in the Action or which reasonably could have been asserted against Defendant based on the factual allegations stated [in] the Operative Complaint filed in the Action.” (Agreement, § 4.2.)

Aggrieved employees are deemed to have released Defendant from “all claims for civil penalties under [PAGA] arising during the PAGA Period that (a) were asserted against Defendant in Plaintiff’s PAGA Notice preceding the Action and/or in the Operative Compliant filed in the Action, or (b) reasonably could have been asserted against Defendant based on the factual allegations stated in Plaintiff’s PAGA Notice preceding the Action (and/or any amended notices) and/or the Operative Complaint filed in the Action[.]” (Id. at § 4.3.)

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 the Settlement meets the standards for preliminary approval. The parties participated in arm’s length negotiations via private mediation with class action

1 While the Agreement sates that administrator costs are “not to exceed $10,000.00” (Agreement, § 2.8.3), Plaintiff’s counsel states that administration costs are capped at $8,990.00. (Gomez Decl., ¶ 10.)

mediator Jason Marsili. (Gomez Decl., ¶ 7.) Prior to reaching settlement, Plaintiff’s counsel conducted informal discovery concerning Plaintiff’s claims, including reviewing timekeeping and payroll records, Defendant’s policies and procedures on wage payment, and other information. (Id. at ¶¶ 5-6.) Plaintiff’s counsel estimated that Defendant’s maximum exposure for the class claims is approximately $1,576,793.80. (Gomez Decl., ¶ 23.) The expected class member payments is $486,875.00, and the PAGA settlement amount is $25,625.00 (35% of which will go to the aggrieved employees and 65% of which will go to the LWDA).

The total gross settlement amount of $512,500.000 represents approximately 32.5 percent of the Defendant’s estimated total maximum exposure. Therefore, the proposed settlement amount is within the general range of percentage recoveries that California courts have found to be reasonable. (See Cavazos v. Salas Concrete, Inc. (E.D. Cal., Feb 18, 2022, No. 1:19-cv-00062-DAD-EPG) 2022 U.S.Dist. LEXIS 30201, at *41-42 [citing cases approving settlements in the range of 5 to 35 percent of the maximum potential exposure].)

Furthermore, Plaintiff’s counsel has explained how the parties arrived at the proposed settlement now before the Court. The Court has reviewed Plaintiff’s written submissions and is satisfied that the settlement is fair and may be approved. C. Service Award, Fees, and Costs Plaintiff seeks a $10,000.00 service award. The rationale for making enhancement or incentive awards to named plaintiffs is that they should be compensated for the expense or risk they have incurred in conferring a benefit on other members of the class.

An incentive award is appropriate if it is necessary to induce an individual to participate in the suit. Criteria courts may consider in determining whether to make an incentive award include: 1) the risk to the class representative in commencing suit, both financial and otherwise; 2) the notoriety and personal difficulties encountered by the class representative; 3) the amount of time and effort spent by the class representative; 4) the duration of the litigation and; 5) the personal benefit (or lack thereof) enjoyed by the class representative as a result of the litigation.

These “incentive awards” to class representatives must not be disproportionate to the amount of time and energy expended in pursuit of the lawsuit. (Cellphone Termination Fee Cases (2010) 186 Cal.App.4th 1380, 1394-1395, internal punctuation and citations omitted.) Incentive awards are particularly appropriate where a plaintiff undertakes a significant reputational risk in bringing an action against an employer. (Covillo v. Specialty’s Café (N.D. Cal. 2014) 2014 U.S.Dist.LEXIS 29837, at *29.) Plaintiff provided a declaration describing her participation in this action and her understanding of her responsibilities as class representative.

She estimates that she has spent approximately 90 hours working on this case in various ways. The Court will issue its determination of the approved service award amount at the final approval hearing. The court also has an independent right and responsibility to review the requested attorney fees and only award so much as it determines reasonable. (See Garabedian v. Los Angeles Cellular Telephone Co. (2004) 118 Cal.App.4th 123, 127-128.) Plaintiff’s counsel will seek attorney fees of up to one-third of the gross settlement amount ($170,833.33) and up to $25,000.00 for litigation expenses.

The anticipated settlement administration costs are not to exceed $10,000.00. Prior to the final approval hearing, Plaintiff’s 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 Class Plaintiffs request that the class be conditionally certified for purposes of the settlement. Rule 3.769(d) of the California Rules of Court states that “[t]he court may make an order approving or denying certification of a provisional settlement class after [a] preliminary settlement hearing.”

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 . . ..” As interpreted by the California Supreme Court, section 382 requires: (1) an ascertainable class; and (2) a well-defined community of interest among the class members. (Sav-On Drug Stores, Inc. v. Superior Court (2004) 34 Cal.4th 319, 326 (Sav-On).)

The “community-of-interest” requirement encompasses three factors: (1) predominant questions of law or fact; (2) class representatives with claims or defenses typical of the class; and, (3) class representatives who can adequately represent the class. (Sav-On, supra, 34 Cal.4th at p. 326.) “Other relevant considerations include the probability that each class member will come forward ultimately to prove his or her separate claim to a portion of the total recovery and whether the class approach would actually serve to deter and redress alleged wrongdoing.” (Linder v.

Thrifty Oil Co. (2000) 23 Cal.4th 429, 435.) The plaintiff has the burden of establishing that class treatment will yield “substantial benefits” to both “the litigants and to the court.” (Blue Chip Stamps v. Superior Court (1976) 18 Cal.3d 381, 385.) As explained by the California Supreme Court, The certification question is essentially a procedural one that does not ask whether an action is legally or factually meritorious. A trial court ruling on a certification motion determines whether the issues which may be jointly tried, when compared with those requiring separate adjudication, are so numerous or substantial that the maintenance of a class action would be advantageous to the judicial process and to the litigants. (Sav-On, supra, 34 Cal.4th at p. 326, internal punctuation and citations omitted.)

Plaintiff states there are 407 class members that can be identified from a review of Defendant’s records. There are common questions regarding whether class members were subjected to common practices that violated wage and hour laws. No issue has been raised regarding the typicality or adequacy of Plaintiffs as class representatives. Therefore, the court finds that the proposed class should be conditionally certified for settlement purposes. E. Class Notice The content of a class notice is subject to court approval. “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.” (Cal.

Rules of Court, rule 3.769(f).) “The notice must contain an explanation of the proposed settlement and procedures for class members to follow in filing written objections to it and in arranging to appear at the settlement hearing and state any objections to the proposed settlement.” (Ibid.) In determining the manner of the notice, the

court must consider: “(1) The interests of the class; (2) The type of relief requested; (3) The stake of the individual class members; (4) The cost of notifying class members; (5) The resources of the parties; (6) The possible prejudice to class members who do not receive notice; and (7) The res judicata effect on class members.” (Cal. Rules of Court, rule 3.766(e).) Here, the form of the notice is generally adequate. It describes the lawsuit, explains the settlement, and states the settlement amounts, including attorney fees and payment to the named plaintiff.

The notice informs class members that they may appear at the final approval hearing to make an oral objection without filing a written objection. However, the third page of the notice is deficient in suggesting that recipients have only “two basic options” under the settlement: do nothing or opt-out. This portion of the notice must be modified to clarify that recipients have two more “basic options”: to object or challenge the number of workweeks and/or pay periods. Finally, 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.

Turning to the notice procedure, the parties have selected Apex as the settlement administrator. Defendant will deliver the class data (i.e., class list and related qualifying workweeks and contact information) to Apex within twenty-one (21) business days after preliminary approval. Apex shall notify class counsel that the class data has been received and state the number of class members, aggrieved employees, workweeks, and pay periods in the class data. Apex shall update class members’ addresses using the National Change of Address Database and mail the notice packet within fourteen (14) days after receiving the class data.

The notice shall be mailed to all identified class members via first-class United States Postal

Service mail. Any returned notices will be re-mailed within five (5) business days to any forwarding address provided or a better address located via skip trace or other search. Class members who receive a re-mailed notice will have an additional fourteen (14) days to respond. Apex shall inform class members receiving a re-mailed notice of the extended deadline. These notice procedures are appropriate and approved. On the condition that the parties make the above changes to the notice prior to its mailing, the notice is approved. IV.

Conclusion

The motion for preliminary approval of the settlement is GRANTED. The final approval hearing shall take place on March 3, 2027 at 2:30 p.m. in Department 5. Case Management Conference at 2:30 p.m. is VACATED. The following class shall be preliminarily certified for settlement purposes: All current and former hourly, non-exempt employees employed by Essential Behavioral Support, Inc., in the State of California during the Class Period [September 20, 2020 through July 29, 2026]. Plaintiff shall prepare the order in accordance with California Rules of Court, rule 3.1312.

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