Herrera vs. Kaiser Permanente International

111 Herrera vs. Kaiser Permanente International

2022-01290908 Motion for Preliminary Approval

Plaintiffs Shasity Ray Herrera, Roberta Julie Zaragoza, and Mark Prado’s Motion for Preliminary Approval of Class Action and PAGA Settlement, Approval of Notice to Class Members, Approval of Settlement Administrator, and Setting Hearing for Final Approval of Settlement, is CONTINUED to January 8, 2027 at 2:00 p.m. in Department CX102 in order to give Plaintiffs’ counsel an opportunity to address the issues identified below.

This is a hybrid putative wage-and-hour class action, putative federal Fair Labor Standards Act (“FLSA”) collective action, and PAGA case.

On 11/9/2022, Plaintiff Shasity Ray Herrera filed a class action complaint against Defendants Kaiser Permanente International and Southern California Permanente Group, Inc., alleging various California Labor Code violations and unfair business practices under Business and Professions Code section 17200 et seq. (ROA #2.) On 1/17/2023, Plaintiff Herrera filed a first amended complaint, adding a cause of action for PAGA penalties. (ROA #12.)

On 2/3/2023, Defendants answered the original complaint. (ROA #18.) On 2/14/2023, Defendants answered the first amended complaint. (ROA #21.)

On 10/28/2024, the parties attended mediation and negotiated a complete settlement of the claims. (See ROA #91, Mot. for Prelim. Approval of Settlement, p. 2.)

Thereafter, the operative second amended complaint (SAC) was filed on 7/16/2025 (ROA #63) pursuant to the parties’ stipulation and the Court’s order (ROA #61). The SAC (1) added two Plaintiffs, Roberta Julie Zaragoza and Mark Prado1 and (2) added 3 claims, including an FLSA claim. (ROA #63.)

On 5/22/2026, Plaintiffs filed the instant Motion for Preliminary Approval of the Class Action and PAGA Settlement, etc. (“Motion”) and submitted the proposed “Class and Representative Action Settlement Agreement and Class Notice” (“Settlement” or “Settlement Agreement”) and proposed Class Notice for the Court’s review. The motion seeks preliminary approval of the parties’ proposed settlement of all of Plaintiffs’ claims for the non-reversionary gross settlement amount (GSA) of $7,930,000. The GSA includes $99,125 allocated for PAGA penalties and $64,600 allocated for the FLSA Settlement Fund.

Hybrid Action—Including FLSA Collective Action The instant case is a “hybrid” case in which the operative complaint alleges (1) California state law wage-and-hour and UCL claims, which are

1 Plaintiff Zaragoza had filed a wage-and-hour class action in Los Angeles County Superior Court, Case No. 24STCV26826, but dismissed that action on 7/23/2025 after the SAC was filed in this case.

subject to the parties’ agreed upon opt-out class notice procedure; (2) a California state PAGA claim, the settlement of which Aggrieved Employees may not opt out of; and (3) a FLSA claim, which are subject to an opt-in requirement. Therefore, the settlement of this case must be properly structured to comply with all of the applicable requirements for opt-outs and opt-ins, and must also provide clear notice to Class Members, Aggrieved Employees, and FLSA Subclass Members as to their rights and the consequences of their actions taken in response to the notice.

In short, the proposed Settlement and Class Notice fail to do so.

“As background, the FLSA establishes standards for minimum wages and overtime pay, and it allows employees to bring collective actions against their employers for violating those standards. There is an inherent tension between FLSA collective actions and class actions. Class actions under California and federal law generally require class members to opt out to avoid being bound by the terms of a judgment. In contrast, an employee must opt in to become a plaintiff in an FLSA collective action. . . . Due to this tension, California courts have found FLSA actions cannot be maintained as class actions under state law.” (Amaro v. Anaheim Arena Management, LLC (2021) 69 Cal.App.5th 521, 539; see also Haro v. City of Rosemead (2009) 174 Cal.App.4th 1067, 1071-1072.)

More specifically, the FLSA provides that “[n]o employee shall be a party plaintiff to any action unless he gives his consent in writing to become such a party and such consent is filed in the court in which such action is brought.” (29 U.S.C. § 216.) Therefore, “FLSA collective actions, unlike [Federal Rules of Civil Procedure,] Rule 23(b)(3) class actions and their state law analogues, are strictly opt-in actions. Workers cannot become plaintiffs to a collective action unless they first file a written consent with the court expressly joining the litigation.” (Rangel v.

PLS Check Cashers of Cal., Inc. (9th Cir. 2018) 899 F.3d 1106, 1109-1110, emphasis original, internal citation omitted; see also Haro, supra, 174 Cal.App.4th at p. 1072 [“The critical . . . difference between FLSA actions and class actions is the opt-in versus the opt-out feature”].) “If an employee does not file a written consent, then that employee is not bound by the outcome of the collective action.” (Edwards v. City of Long Beach (C.D.Cal. 2006) 467 F.Supp.2d 986, 989.)

The instant Settlement proposes that the required consent to join the FLSA collective action be given by signing the back of the settlement check that will eventually be sent after final approval of this Settlement:

Opt-in and release language regarding the release of the FLSA claim will be printed on the Individual Class Payment checks with instructions that cashing such check constitutes consent under the FLSA to opt into the collective action. The language to be included will be substantially similar to the following:

“By endorsing or otherwise negotiating this check, I acknowledge that I read, understood, and agree to the terms set forth in the Notice of Class Action Settlement and I consent to join in the Fair

Labor Standards Act (“FLSA") portion of the Action, elect to participate in the settlement of the FLSA claims, and agree to release all of my FLSA claims that are covered by the Settlement.”

(ROA #97 [Counsel Decl.], Exh. 1 [Settlement], ¶ 4.3.1.1.)

The Settlement also proposes that the administrator may send a single check that combines (1) the Individual Class Payment, (2) the Individual PAGA Payment, and (3) the Individual FLSA Payment. (Id. at ¶¶ 1.31, 4.3.1.)

The Settlement further proposes that “[f]or any Class Member who opts out, the Administrator will send a check for only the Individual PAGA Payment.” (Id. at ¶ 4.3.1.)

These proposals are problematic for 3 primary reasons, which are cogently explained by the Eastern District of California in 4 orders addressing a motion for preliminary approval of a settlement in a “hybrid” case similar to the instant case: [1] Beltran v. Olam Spices and Vegetables, Inc. (E.D.Cal., Jun. 2, 2020, No. 1:18-cv-01676-NONE-SAB) 2020 WL 2850211 (“Beltran I”) (magistrate judge findings and recommendations); [2] Beltran v. Olam Spices and Vegetables, Inc. (E.D.Cal., Dec. 30, 2020, No. 1:18-cv-01676-NONE-SAB) 2020 WL 7769822 (“Beltran II”) (district court judge order); [3] Beltran v.

Olam Spices and Vegetables, Inc. (E.D.Cal., Mar. 23, 2021, No. 1:18-cv-01676-NONE-SAB) 2021 WL 1105246 (“Beltran III”) (magistrate judge order); and [4] Beltran v. Olam Spices and Vegetables, Inc. (E.D.Cal., June 4, 2021, No. 1:18-cv-01676- NONE-SAB) 2021 WL 2021 WL 2284465 (“Beltran IV”) (district court judge order).

1. The Proposed Settlement Applies an Opt-Out Procedure that Does Not Comply with the FLSA’s Opt-In Requirement, and the Proposed Class Notice Is Inadequate First, as the magistrate judge initially noted in Beltran I, numerous federal district courts in California “that have considered this [signed-check] procedure have found that it does not comply with the FLSA.” (Beltran I, supra, at *12, citing cases.) Indeed, even just a few months ago, the Eastern District of California issued a to-be-published opinion confirming that “the cashing of a check to opt-in to an FLSA collective and release FLSA claims fails to satisfy FLSA’s written consent requirements.” (Salinas v. NestlØ Purina PetCare Company (E.D.Cal, Apr. 15, 2026, No. 1:21-cv-01140 JLT CDB) 2026 WL 1018655, at *10 (slip copy).)

The reason the signed-check procedure does not comply with the FLSA is because it essentially applies an opt-out procedure rather than a true opt-in procedure:

Plaintiffs fail to address how opting-into the class by signing the settlement check complies with the requirement that the employee provide his consent in writing to become a party to this action. In essence, the settlement agreement treats each employee as being

included in the FLSA settlement and the failure to cash the check would be the employee’s decision to opt-out.

(Beltran I, supra, 2020 WL 2850211, at *12, emphases added; see also Duque v. Bank of America (C.D.Cal., Oct. 12, 2018, No. SA CV 18-1298 PA (MRWx)) 2018 WL 11327751, at *2 [expressing “concern[] that the [signed-check] process established by the Settlement Agreement effectively transformed the FLSA collective into a Rule 23 opt-out class and was therefore inconsistent with the FLSA’s ‘opt-in’ requirement,” and finding that while the process “might be more efficient, result in a larger number of members opting into the collective, and prevent potential collective members from having their claims barred by the applicable FLSA statute of limitations, those potential benefits to the adoption of such a procedure do not allow this Court to ignore the plain language of the FLSA’s opt-in requirement”].)

Indeed, the proposed Class Notice here even admits that an opt-out process is being applied to FLSA Subclass Members: “You will be treated as a Participating . . . FLSA Subclass Member, participating fully in the Settlement, unless you notify the Administrator in writing, not later than _____________, that you wish to opt-out.” (Settlement, Exh. A [Proposed Class Not.], § III.6.)

Yet the law is clear that “‘[u]nder no circumstances can counsel collude to take away FLSA rights including the worker’s right to control his or her own claim without the burden of having to opt out of someone else’s lawsuit.’” (Smith, supra, at *11, emphasis added, quoting Kakani v. Oracle Corp. (N.D.Cal., June 19, 2007, No. C 06-06493 WHA) 2007 WL 1793774, at *7.)

Accordingly, “if Plaintiffs wish to pursue this action as a hybrid action [i.e., a putative class action involving state-law wage-and-hour claims and a collective action under the FLSA,] the class members and [FLSA] collective members [must] have the option to decide if they want to remain in the class action and whether they want to opt-in to the collective action prior to final approval of the settlement.” (Beltran I, supra, 2020 WL 2850211, at *12, emphases added.) Notice and the opportunity to opt-in prior to final approval of the settlement are important because:

In an FLSA action, the court must provide potential plaintiffs accurate and timely notice concerning the pendency of the collective action, so that they can make informed decisions about whether or not to participate. A collective is not formed until other plaintiffs file consent forms with the court joining (that is, opting into) the original named plaintiff’s case. The procedure here does not provide for a putative member of the collective action to make an informed decision about whether they should choose to participate in the collective action until after final approval of the settlement agreement. Plaintiffs are required under the FLSA to provide notice of the collective action and an opportunity for the putative members to opt into the

collective action. The Court finds that to comply with the FLSA the parties must provide notice and an opportunity to opt-in to the FLSA action prior to final approval of the settlement agreement. The procedure proposed here, having FLSA members opt-in to the collective action by signing the back of their settlement check, does not comply with the requirements of the FLSA.

(Id. at *13, internal quotes & citations omitted.)

Indeed, as the district judge in Beltran II acknowledged, “opting in after final approval leaves an opt-in plaintiff with little opportunity to participate meaningfully in the litigation,” which is “why there is typically a preliminary approval hearing followed by notice and an opt-in period, and then a final hearing.” (Beltran II, supra, 2020 WL 7769822, at *9, internal quotes, brackets, ellipses, & citations omitted, emphasis added.)

The parties in Beltran had planned for separate notices to Rule 23 class members and to FLSA members. (Beltran I, supra, 2020 WL 2850211, at *6.) The Rule 23 class would be provided with information on how to opt out, while the FLSA notice would provide the deadline to send workweek disputes. (Id.)

The district judge found that the parties’ “proposed Notice explains to the potential FLSA collective members in detail exactly what their rights are regarding opt-in and opt-out in connection with the FLSA settlement and clearly distinguishes between that procedure and the Rule 23 settlement ‘opt-out’ process.” (Beltran II, supra, 2020 WL 7769822, at *9, emphasis added.) Indeed, “in hybrid Rule 23 and FLSA actions, the parties’ notice forms must indicate 1) the hybrid nature of the action, 2) the claims involved, 3) the options available to the class members, i.e., how to participate in or abstain from the Rule 23 and FLSA actions, and 4) the consequences of opting in to the FLSA collective action, opting out of the Rule 23 class action, or doing nothing.” (Schmidt v.

Vision Service Plan (E.D.Cal., Aug. 30, 2023, No. 2:20-cv-2400-KJN) 2023 WL 5613103, at *3; see also Thompson v. Costco Wholesale Corporation (S.D.Cal., Feb. 22, 2017, No. 14-cv-2778-CAB-WVG) 2017 WL697895, at *8 [same]; Pierce v. Rosetta Stone, Ltd. (N.D.Cal., May 3, 2013, No. C 11–01283 SBA.) 2013 WL 1878918, at *4 [same].)

Accordingly, in Beltran II, the district judge preliminarily opined that

[T]he parties plan a notice process that will provide potential FLSA collective members with notice in advance of the final approval hearing, so that they can ‘meaningfully participate’ should they choose to do so, even if the formal opt-in period does not occur until after final approval. It is the combination of the fact that the parties intend to send separate FLSA and Rule 23 payments along with the content of the proposed Notice that may satisfy the [court] that the opt-in by check-cashing is appropriate for the FLSA settlement in this case. The parties will be required to address this issue in far more detail in any motion for final

approval in the event that preliminary approval is eventually granted.

(Beltran II, supra, 2020 WL 7769822, at *9, internal citation omitted, italics original, bolding added; see also id. at fn. 7 [“Having fully vetted the issue and the applicable caselaw in this order, the court will expect effective briefing by the parties. The court gives the parties no assurance as to whether it will find the proposed consent by check cashing provision of the proposed settlement appropriate at the final approval stage of these proceedings if that stage is reached”].)

Additionally, the district judge required that the proposed notice be “modified to explicitly make it even more clear that any person who is potentially part of both the FLSA collective and the Rule 23 class may receive multiple checks.” (Id., emphasis added.)

The matter was then back to the magistrate judge. (Beltran III, supra, 2021 WL 1105246, at *1.) After considering the parties’ supplemental briefing, the magistrate judge concluded that final approval of settlement proposing the signed-check procedure “could not be granted” “given the weight of authority addressed finding that the procedure does not comport with the FLSA.” (Id. at *4.) The court found that “there is significant case law in this circuit which calls into question whether such a procedure is sufficient to comport with the FLSA,” and no caselaw has made “a substantive finding that consenting to join an FLSA collective action by signing the back of the settlement check is compl[ia]nt with the FLSA.” (Id. at *2-3.)

Ultimately, the parties in Beltran abandoned their signed-check proposal and “revised the [settlement] agreement to provide for a two-step opt in procedure,” with “the first step involv[ing] mailing the notice of the FLSA action, an opt-in card, and the settlement terms.” (Beltran IV, supra, 2021 WL 2284465, at *8, emphases added.) Under the parties’ new proposal, “[t]he settlement administrator with the assistance of class counsel will have the opt in forms filed with the court within five days of the opt in deadline.” (Id.)

Thus, “[o]nly those FLSA members who give their consent in writing to become a party and have their consent form filed with the Court will be deemed to have consented to join the FLSA action.” (Id.) The district judge found this new proposal to have “corrected the deficiencies identified in the FLSA collective action settlement and the opt in procedure comports with 29 U.S.C. § 216(b).” (Id.)

Other courts have also required parties in similar cases to comply with the FLSA by “directing putative FLSA collective action members to send an opt in form to the Claims Administrator and having Plaintiffs file the opt in forms with the Court.” (Johnson v. Quantum Learning Network, Inc. (N.D.Cal., Aug. 12, 2016, No. 15-CV-05013-LHK) 2016 WL 8729941, at *1; see also Kempen v. Matheson Tri-Gas, Inc. (N.D.Cal., Aug. 1, 2016, No. 15-cv-00660-HSG) 2016 WL 4073336, at *9 [same]; Oliveria v. Language Line Services, Inc. (N.D.Cal. 2025) 767 F.Supp.3d 984, 997- 998, 1009 [in hybrid action, preliminary approval granted where separate

procedures and deadlines applied to class members for opting out of California class and to FLSA collective members for opting into FLSA collective, and final approval granted after 42.7% of FLSA collective members opted in].)

Here, in contrast, the instant Settlement does not propose that FLSA Subclass Members first send in an opt-in form before being treated as a Participating FLSA Subclass Member for settlement purposes. The proposed Class Notice mentions nothing about sending FLSA Subclass Members an opt-in form to be returned prior to the motion for final approval being heard. Instead, the Settlement and Class Notice propose that the FLSA Subclass Members will opt in by signing the back of their settlement checks—which will not be sent until after final approval has already been granted.

Moreover, the Settlement provides the following as to how the amount of each FLSA Subclass Member’s settlement payment will be calculated:

Each FLSA Subclass Member will be entitled to receive an amount, subject to any applicable employee payroll taxes, equal to a proportionate share of the FLSA Settlement Fund, calculated by (i) the number of the Participating FLSA Subclass Member’s attributed Workweeks during the FLSA Subclass Period, divided by (ii) the total Workweeks of all Participating FLSA Subclass Members during the FLSA Subclass Period.

(Settlement, ¶ 3.2.5, emphases added.) It is, of course, fair and reasonable that each Participating FLSA Subclass Member’s Individual FLSA Payments will be calculated pro rata based upon that Member’s workweeks compared to the total number of workweeks of all Participating FLSA Subclass Members. However, the Settlement here contemplates that the administrator will send out a single check to each Participating Class Member that will already include the Participating Class Member’s Individual FLSA Payment.

That means that the administrator will have already determined the total number of workweeks of all “Participating” FLSA Subclass Members before any FLSA Subclass Members have actually signed the acknowledgment on the back of the check and indicated their consent to join or participate in the FLSA portion of the Action. How can the administrator determine how many “Participating” FLSA Subclass Members there are or how many total workweeks there are among the “Participating” FLSA Subclass Members before any FLSA Subclass Members have even agreed to participate?

And what happens if a Class Member fails to sign the acknowledgment and cash their “single” check, thereby refusing to participate in the FLSA portion of this action? Will the administrator, after the check-cashing period has expired, recalculate how many “Participating” FLSA Subclass Members there actually are and then issue new checks? The Settlement Agreement does not appear to contemplate such recalculation and additional check issuance, as ¶ 4.3.3 provides only that “[a]fter 180 days from the date of their mailing by the Settlement Administrator, the funds from any settlement checks distributing Individual Class Payments,

Individual FLSA Payments, or Individual PAGA Payments that are returned to the Settlement Administrator as undeliverable or that have not been cashed will be transmitted to Lawyers’ Committee for Civil Rights, the cy pres recipient agreed upon by the parties.” Moreover, ¶ 3.2.5.2 merely provides: “Effect of Non-Participating FLSA Subclass Members on Calculation of Individual FLSA Payments. Non-Participating FLSA Subclass Members will not receive any Individual FLSA Payments. The Administrator will retain amounts equal to their Individual FLSA Payments in the FLSA Settlement Fund for distribution to Participating FLSA Subclass Members as stated in Paragraph 3.2.5.” And ¶ 3.2.5, in turn, does not provide for recalculation or issuance of new checks.

Additionally, the instant Settlement proposes that only one combined notice be sent to all Class Members, Aggrieved Employees, and FLSA Subclass Members. Most importantly, the proposed Class Notice does not even come remotely close to clearly explaining the differences between the putative class claims and the FLSA collective claims or the differences between the opt-out class procedure and the opt-in FLSA procedure.

As discussed above, “[i]n an FLSA action, the court must provide potential plaintiffs accurate and timely notice concerning the pendency of the collective action, so that they can make informed decisions about whether or not to participate.” (Thompson, supra, 2017 WL 697895, at *8.) “In light of this requirement, and because of the inherent differences between Rule 23 class actions and FLSA collective actions, courts considering approval of settlements in these hybrid actions consistently require class notice forms to explain: (1) the hybrid nature of the action; and (2) the claims involved in the action; (3) the options that are available to California Class members in connection with the settlement, including how to participate or not participate in the Rule 23 class action and the FLSA collection action aspects of the settlement; and (4) the consequences of opting-in to the FLSA collective action, opting-out of the Rule 23 class action, or doing nothing.” (Id., internal quotes, brackets, & citations omitted.)

Here, the proposed Class Notice is unquestionably deficient and obfuscates the fact that the case alleges an FLSA claim and that to obtain their Individual Class Payments and Individual PAGA Payments, Class Members and Aggrieved Employees will have to give their consent to join the FLSA claim.

Here are just a few examples of the proposed Class Notice’s deficiencies:

1. In the 1st paragraph, the proposed notice describes the case as only “alleg[ing] violations of the California Labor Code,” with no mention of the FLSA.

2. The 1st paragraph also only defines “Class Members” and “Aggrieved Employees,” without mention of the FLSA Subclass. Nor does the proposed notice at any point define “FLSA Subclass Members.”

3. Similarly, the 2nd paragraph describes the proposed Settlement as having only “two main parts”—i.e., Individual Class Payments and Individual PAGA Payments, with no mention of the Individual FLSA Payments.

4. On p. 3, in Section III.2, the summary of proposed deductions from the GSA does not mention any amount allocated to the FLSA Settlement Fund, even though it mentions the allocation to the PAGA Fund.

5. Also on p. 3, in Section III.3, the description of the Net Settlement Amount (“NSA”) likewise makes no mention of Individual FLSA Payments to be made from the FLSA Settlement Fund.

6. Further on p. 3, in Section III.4, the tax treatment summary fails to mention Individual FLSA Payments.

7. The first mention of the FLSA appears at the bottom of p. 2 in the form of a reference to “Individual FLSA Payments” being covered by the GSA. Not only is “FLSA” only ever used in acronym form and never spelled out to reference the “Fair Labor Standards Act,” but the proposed notice never explains, inter alia, what is an FLSA claim; how it differs from California state law Labor Code claims; the factual allegations underlying Plaintiffs’ FLSA claim; the optin procedure required by the FLSA; and how it differs from the opt-out procedure Plaintiffs are using for the non-FLSA and non- PAGA class claims.

8. The first mention that the proposed Settlement requires FLSA Subclass Members to opt in by signing their single check including all types of settlement payments is at the bottom of p. 4 and top of p. 5, where this requirement is buried within the language of the release that all (undefined) FLSA Subclass Members will be subject to.

9. It is true that under Section V, “How Will I Get Paid?” there is a subparagraph 2 that states: “Non-Participating Class Members. Non-participating Class Members and/or FLSA Subclass Members (i.e. Class Members and/or FLSA Subclass Members who opt out of the settlement) will not be eligible for any payment under the Class Settlement. If a Non-Participating Class Member and/or FLSA Subclass Member is also an Aggrieved Employee, the Administrator will send, by U.S. mail, a single Individual PAGA Payment check.” But this is far from clear and explicit notice of the consequences of opting in to the FLSA collective action, opting-out of the non-FLSA class action, or doing nothing.

10. As noted above, the proposed notice openly admits that the parties seek to apply the typical opt-out class action procedure to the

FLSA claim in the action: “You will be treated as a Participating Class Member and/or FLSA Subclass Member, participating fully in the Settlement, unless you notify the Administrator in writing, not later than _____________, that you wish to opt-out.” (Proposed Class Not., § VI.) As discussed above, applying an optout process to the complaint’s FLSA claim clearly flies in the face of the FLSA’s opt-in requirement.

11. Moreover, in light of the proposed notice’s open admission that the proposed settlement requires Class Members to opt into the FLSA claim in order to obtain their Individual Class Payment, the proposed notice’s initial explanation that Class Members can “Do Nothing” to “participate in the proposed Settlement and be eligible for an Individual Class Payment” is misleading, at best.

12. Even though the proposed notice has a section titled “III. What Are the Important Terms of the Proposed Settlement,” this section does not include a clear admonition that Class Members must opt in to the FLSA claim to receive their Individual Class Payment.

13. In Section VII on p. 6, the proposed notice states that “[o]nly Participating . . . FLSA Subclass Members have the right to object to the . . . FLSA Subclass Settlement.” However, the proposed settlement is structured such that participation does not occur until later—i.e., after final approval, after the settlement check is issued, and after the individual signs the checks and elects to opt in to participate in the FLSA claim.

In short, not only is the structure of the proposed settlement problematic, but the proposed class notice is also a far cry from the type of clear notice required by courts in a hybrid action such as this one.

Moreover, as noted above, the instant Settlement proposes that the administrator may send a single check combining all types of settlement payments. As explained above, in the Beltran II, the district judge preliminarily opined that the check-signing procedure may be approved if the separate checks are sent for class settlement payments and FLSA settlement payments. The district judge explicitly required the parties to further amend their proposed class notice to make the separate check requirement explicit. But here, separate checks are not required.

2. Sending a Single Combined Check Results in a “Penalty” to Class Members and Aggrieved Employees for Not Opting into the FLSA Collective Action The single-check requirement is a second reason why the proposed Settlement is problematic. In essence, the Settlement requires a Class Member who does not wish to opt into the FLSA claim by signing the back of their check to forfeit their right to collect their Individual Class Payment and Individual PAGA Payment—all while still being bound by the releases applicable to Class Members and Aggrieved Employees. The proposed Class Notice even directly admits this effect of the settlement:

“Non-participating . . . FLSA Subclass Members . . . will not be eligible for any payment under the Class Settlement.” (Proposed Class Not., § V.2.)

“As a result, Class Members are assessed a penalty (in the full amount of their share of the settlement) for not opting-into the FLSA class.” (Smith v. Kaiser Foundation Hospitals (S.D.Cal., Nov. 7, 2019, No. 3:18- cv-00780-KSC) 2019 WL 5864170, at *11, internal quotes omitted, emphasis added; see also Martinez v. Anning-Johnson (C.D.Cal., Sept. 2, 2015, No. CV 14-6325-GHK (E)) 2015 WL 14097288 [“if a Class Member chooses not to cash a check based on the FLSA release, he or she would still have released all state law claims. In essence, Class Members are assessed a penalty (in the full amount of their share of the Settlement) for not opting-into the FLSA class. We question the legality of imposing such a penalty on the exercise of a federal right to not opt-in under the FLSA.”].)

Indeed, courts have repeatedly “questioned the legality of requiring individuals to opt in to an FLSA collective action in order to obtain their share of recovery on non-FLSA claims.” (Haralson v. U.S. Aviation Services Cop. (N.D.Cal. 2019) 383 F.Supp.3d 959, 969, internal quotes & brackets omitted; see also Thompson, supra, 2017 WL697895, at *7 [“the settlement requires Rule 23 class members to release FLSA claims to benefit from the settlement of the state law claims,” and “the legality of this opt in structure is suspect”].)

3. Class Members Do Not Have the Option of Opting Out of the Class Settlement While Opting Into the FLSA Collective Action Third, as noted above, the Settlement further proposes that “[f]or any Class Member who opts out, the Administrator will send a check for only the Individual PAGA Payment.” (Settlement, ¶ 4.3.1.) This means that a Class Member may not opt out of the state-law-based class action without also forfeiting their right to opt into the FLSA collective action.

In short, “Plaintiffs must provide for a mechanism for a recipient to participate in the Rule 23 class but not opt in to the FLSA collective action that complies with the FLSA. Further, a member may choose to opt out of the Rule 23 class and opt into the FLSA collective action. The notice provided to the putative members must: (1) explain how much of the settlement amount will be paid for the release of the FLSA claims; (2) explain and provide a mechanism for recipients to opt-in to the collective action that complies with the FLSA; and (3) explain the consequences of opting into the FLSA collective, opting out of the Rule 23 class, or doing nothing.” (Beltran I, supra, 2020 WL 2850211, at *14, emphasis added.)

Ultimately, as Plaintiffs “chose to proceed with an FLSA action,” and “an FLSA action is predicated on opting in instead of opting out,” the FLSA portion of the action must comply with “rules that are specifically applicable to these actions and if litigants do not like these rules, they

should not file under the FLSA.” (Harro, supra, 174 Cal.App.4th at p. 1077.)

Importantly, Plaintiffs’ moving papers wholly fail to address these issues. Moreover, as discussed below, Plaintiffs’ counsel’s valuation analysis also completely omits any discussion of Plaintiffs’ FLSA claim. Plaintiffs must submit supplemental briefing and a revised Settlement Agreement and Class Notice that adequately addresses the Court’s concerns before preliminary approval can be granted.

Other Issues with Proposed Settlement Agreement The Court has identified several other issues with the Settlement Agreement and moving papers. Accordingly, the following issues must also be addressed by Plaintiffs’ counsel before preliminary approval can be granted:

1. Counsel has failed to provide the court with a text-searchable settlement agreement in compliance with CRC 2.256(b)(3). Many of counsel’s other filings suffer from the same defect.

2. The moving papers do not include a copy of any of Plaintiffs’ LWDA PAGA notice letters, which the Court needs to verify that the settlement terms are consistent with the notices provided to the LWDA.

3. Paragraph 1.23 contains a clear typo in the text spelling out the amount of the NSA allocated to the FLSA Settlement Fund: “Sixty-Four Six Hundred Thousand ($64,600.00).”

4. Paragraph 1.25 defines “Individual Class Payment” as “the Participating Class Member’s pro rata share of the Net Settlement Amount calculated according to the number of Workweeks worked by that Participating Class Member during the relevant period.” (See also Settlement, ¶ 3.2.4.) “Net Settlement Amount” (NSA), in turn, is defined as “the Gross Settlement Amount, less the following payments in the amounts approved by the Court: the LWDA PAGA Payment, Class Representative Service Payments, Class Counsel Fees Payment, Class Counsel Litigation Expenses Payment, and the Administration Expenses Payment.” (Settlement, ¶ 1.31.)

Therefore, the NSA, by definition, includes both (1) the Aggrieved Employees’ 25% share of the PAGA Penalties and (2) the FLSA Settlement Fund. Thus, as phrased, ¶ 1.25 improperly uses the full Net Settlement Amount as the denominator for Individual Class Payments, when $99,125.00 of the NSA should be preserved for paying Individual PAGA Payments and $64,600.00 of the NSA should be preserved for paying Individual FLSA Payments.

5. The parties have designated that unclaimed funds will be remitted to Lawyers’ Committee for Civil Rights as the cy pres recipient. (Settlement, ¶ 4.3.3.) However, the parties have not complied with CCP section 384 in demonstrating the propriety of the cy pres recipient by explaining that such a distribution fulfills the purposes of the lawsuit or is otherwise appropriate. The parties also have not provided the Court with any declaration from counsel as to any potential conflict of interest as to the proposed cy pres recipient, as required by CCP section 382.4.

6. There are several problems with the Settlement Agreement’s escalator clause at ¶ 7.9.

a. First, the Settlement Agreement does not define “GFV.” The Settlement Agreement does provide for a “Gross Settlement Amount,” but that does not translate into an acronym of “GFV.”

b. Second, ¶ 7.9 states that the Settlement is based on a workweek estimate of approximately 3,432,850. However, the moving memorandum of points and authorities provide estimated average payments to Class Members based upon an estimate of “3,505,407 workweeks during the Class Period.” (Mot. P&A at pp. 2, 10.) Counsel should explain this discrepancy and ensure that Plaintiffs provide the Court with a proper estimate for average class payments.

c. Finally, because the escalator clause provides Defendants with the option to shorten the Class Period, the clause not only renders the Class Period uncertain but may also result in otherwise eligible Class Members being excluded from the Settlement.

7. Plaintiffs’ counsel must provide a detailed valuation analysis of why the settlement is fair, adequate, and reasonable in light of the strengths and weaknesses of the claims, which should specify (1) the maximum realistic recovery on each claim asserted in the operative complaint, including penalties (calculated based on number of workweeks, average daily pay rate, violation rate, etc.); (2) defenses asserted by Defendant; (3) a summary of the risks, expenses, and duration of further litigation if the settlement is not approved; (4) any other relevant factors justifying the settlement amount (e.g., Defendant’s financial condition); (5) the actual discount amounts applied to each claim for certification and merits risks; (6) the adjusted value of each claim after applying any discounts, and (7) an analysis of the GSA as a percentage of the maximum realistic recovery and the risk-adjusted recovery. (See Munoz v.

BCI Coca-Cola Bottling Co. of Los Angeles (2010) 186 Cal.App.4th 399, 409; Kullar v. Foot Locker Retail, Inc. (2008) 168 Cal.App.4th 116, 129.)

a. On Plaintiffs’ PAGA claim, while counsel generally reference risks associated with merits, manageability, and courts’ inherent authority to limit penalty amounts, counsel has not provided the Court with any estimates of maximum value or realistic adjusted value for the PAGA claim. Thus, there is insufficient information to allow the Court to evaluate the fairness and adequacy of the $396,500.00 allocated to PAGA Penalties from the GSA.

b. As noted above, counsel’s declaration wholly omits any valuation analysis for Plaintiffs’ FLSA claim. Thus, the Court has no information to evaluate the fairness and adequacy of the $64,600.00 allocated to the FLSA Settlement Fund from the NSA.

Based on the allegations of the operative complaint, Plaintiffs’ FLSA claims are based on the same rounding and regular rate theories discussed above with respect to Plaintiffs’ unpaid wages and overtime premium claims under state law. However, the provided valuation analyses of those state law claims do not explain how the parties arrived at $64,600 for the FLSA claims specifically.

Moreover, the complaint also alleges that the FLSA claims are based on Defendants’ failure to pay for off-the-clock work, which is not analyzed anywhere in counsel’s valuation analysis in support of the instant motion.

Additionally, “in order to settle claims under the FLSA there must be a bona fide dispute. A bona fide dispute exists where there are legitimate questions about the existence and extent of a defendant’s liability and there is some doubt that the plaintiffs would succeed on the merits of their FLSA claims in the litigation. If there is no question that the FLSA entitles plaintiffs to the compensation they seek, then a court will not approve a settlement because to do so would allow the employer to avoid the full cost of complying with the statute.” (Beltran I, supra, 2020 WL 2850211, at *11, internal quotes & citations omitted.) “Federal law requires that all hours worked be paid and if there is no dispute that the employees should have been paid for this time then Defendant cannot avoid the full cost of complying with FLSA by settling these claims.” (Id.)

Conversely, where a defendant is not liable under the FLSA or where FLSA claims are meritless, there is also no bona fide dispute. (See, e.g., Gonzalez v. CoreCivic of Tennessee, LLC (E.D.Cal., Sept. 13, 2018, No. 1:16-cv-01891-DAD-JLT) 2018 WL 4388425, at *6.) Ultimately, Plaintiffs’ counsel has offered no analysis to

support the finding that the parties have a bona fide dispute under the FLSA or how these claims should be valued.

8. The Settlement Agreement states that the administrator shall make the final determination as to the authenticity and validity of an optout request. (Settlement, ¶ 7.5.2.) But the Court will ultimately decide any unresolved dispute regarding the authenticity and/or validity of an opt-out request.

9. The Settlement Agreement also states that the administrator will resolve any workweek/pay period disputes and that the administrator’s decision on such disputes will be final and nonappealable. (Settlement, ¶ 7.6.) While the settlement administrator may make the initial decision regarding claim disputes, the Court may review any decision made by the settlement administrator regarding a claim dispute.

10. In ¶ 5.2, Released Class Claims is defined as “[a]ny and all claims, debts, liabilities, demands, obligations, penalties, premium pay, guarantees, costs, expenses, attorney’s fees, damages, actions or causes of action of whatever kind or nature, whether known or unknown, contingent or accrued, that were alleged or that reasonably could have been alleged based on the factual allegations that are alleged in the Operative Complaint or LWDA letters in Plaintiffs’ Actions or that reasonably could have been alleged based on the same set of operative facts alleged in the Operative Complaint or LWDA letters in Plaintiffs' actions.” (Emphases added.) The Released Class Claims should not be based on facts alleged in the LWDA notice letters.

11. Paragraph 5.2 also includes an additional paragraph with additional combined definitions applicable to both the “Class and PAGA releases: “These Class and PAGA releases include claims under any legal theory under federal and state law for any alleged failure to pay all wages due (including minimum wage and overtime wages), claims regarding rounding, grace periods, shift tolerance, failure to pay for all hours worked (including off-the clock work), failure to provide meal and rest periods, short/late meal and rest periods, failure to relieve of all duties during meal and rest periods, combining of meal and rest periods, that Defendants’ exemption permit from the DLSE is not valid or does not apply to Class Members, failure to timely pay wages and final wages, failure to pay or properly calculate the regular rate of pay, failure to pay or properly calculate meal or rest period premiums, failure to pay or properly calculate paid sick leave, including paid sick leave under the Healthy Workplaces, Healthy Families Act, failure to pay or properly calculate overtime premiums, donning and doffing, pre or post-shift testing or inspections, health status related activities including testing, reporting, and queuing for testing, reporting time pay, on-call pay, failure to furnish accurate wage statements

including claims derivative and/or related to these claims, liquidated damages, conversion of wages, that the Labor Code Section 514 exemption does not apply to Defendants’ employees, pre and post-shift work and record-keeping violations, including claims for violation of Labor Code Sections 201, 202, 203, 204, 210, 206, 216, 218, 218.5, 218.6, 221-224, 225.5, 226, 226.3, 226.7, 227, 227.3, 233, 245 et seq., 510, 511, 512, 516, 517, 551, 552, 558, 1174, 1174.5, 1175, 1182.12, 1194, 1194.2, 1195, 1197, 1197.1, 1198, 1198.5, 1199, all claims and theories arising under Labor Code Section 2802 (except as set forth in paragraph 5.2.1 below), provisions of the Wage Orders that are analogous to such Labor Code provisions, as well as claims under Business and Professions Code section 17200 et seq. and/or Labor Code Section 2698 based on the factual allegations that are stated in the Operative Complaint or LWDA letters in Plaintiffs’ actions, or that reasonably could have been alleged based on the same set of operative facts alleged in the Operative Complaint or LWDA letters in Plaintiffs’ actions.”

a. First, from a grammatical standpoint, ¶ 5.2 is difficult to follow and parse. The parties should clarify which phrases go together and which phrases modify which other phrases by using semicolons in addition to commas, as well as appropriate conjunctions.

b. Second, ¶ 5.2 inappropriately lumps together the definitions of Released Class Claims and Released PAGA Claims into a single combined definition applicable to both types of claims. But these two different types of releases are distinct, as a Class Member who opts out of the Settlement is not bound by the Released Class Claims but would still be bound by the Released PAGA Claims.

12. Paragraph 5.3 of the Settlement Agreement states, in relevant part: “Release by FLSA Subclass Members: FLSA Subclass Members who timely cash or otherwise negotiate their Settlement Payment Check will be deemed to have opted into the Action for purposes of the FLSA and, as to those Class Members, the Released Claims include any and all claims the Class Members may have under the FLSA arising under or related to the alleged claims during the Class Period. Only those FLSA Subclass Members who timely cash or otherwise negotiate their Settlement Payment Check will be deemed to have opted into the Action for purposes of the FLSA and thereby release and waive any of their claims under the FLSA arising under or relating to the alleged claims. . . .”

a. This ¶ 5.3 appears to suggest that no FLSA claims would be released except by opting into the FLSA portion of the Action. However, this contradicts the combined definition for Released Class Claims and Released PAGA Claims in ¶ 5.2, which purports to include within its broad reach FLSA claims, as such claims fall under the definition of “claims under any legal theory under federal . . . law for any alleged failure to pay all wages due (including minimum wage and overtime wages), claims regarding rounding, grace periods, shift tolerance, failure to pay for all hours worked (including off-the clock work).” Thus, a Participating Class Member who does not sign and cash their one single payment check, and therefore does not opt into the FLSA portion of the Action, will still be deemed to have released their FLSA claims under ¶ 5.2.

Notably, in contrast, in Beltran I, the parties’ proposed release for the general class claims explicitly includes only “statutory . . . claims for wages . . . based on any and all applicable statutes (other than the Fair Labor Standards Act[)].” (Beltran I, supra, 2020 WL 2850211, at *4.)

b. The Released FLSA Claims is also worded differently and more broadly than the other released claims in that the FLSA release purports to release “any and all claims the Class Members may have under the FLSA arising under or related to the alleged claims during the Class Period.” (Settlement, ¶ 5.3, emphasis added; see Amaro, supra, 69 Cal.App.5th at p. 538, emphasis original [settlement’s release is overbroad where it purports to release “potential claims . . . relating in any way to the . . . theories pled,” as “the release must be tied to the factual allegations in the complaint, not claims or theories of liability asserted”].)

Instead, the FLSA release should be rephrased to release “any and all claims the Class Members may have under the FLSA that were alleged or that reasonably could have been alleged based on the factual allegations that are alleged in the in the Operative Complaint,” which matches the language used for the Released Class Claims and the Released PAGA Claims.

13. The Settlement Agreement should specify that the Court’s continuing jurisdiction is pursuant to California Code of Civil Procedure section 664.6 and California Rules of Court, rule 3.769(h).

14. Plaintiffs’ counsel must attest to whether there are any concurrent pending cases involving similar claims against Defendant that may

be impacted by the settlement and how, or confirm that there is none.

15. The complaint was filed November 9, 2022, and the LWDA notice was served the same day. Yet the Class Period, PAGA Period, and FLSA Subclass Period are all defined as February 6, 2024 through December 31, 2025. A class period that begins more than fifteen months after filing is unusual and unexplained; it appears to exclude a substantial cohort of employees with pre-2024 claims within the limitations periods. This may be a product of the carveouts for the Jones, Uribe, and LeDoux actions referenced in § 5.2.1, but that is not explicitly stated. Counsel must explain why the class period starts as of November 2024 and why excluding pre-2024 employees is appropriate, particularly given the release period.

Other Issues with Proposed Class Notice The Court has identified several other issues with the proposed Class Notice. Accordingly, the following issues must also be addressed by Plaintiffs’ counsel before preliminary approval can be granted:

1. The notice must also be revised so as to be consistent with the resolution of all issues identified above with respect to the Settlement Agreement.

2. The following sentences on p. 1 should be bolded: “Your legal rights are affected whether you act or not act. Read this Notice carefully. You will be deemed to have carefully read and understood it.”

3. On pp. 1-2, it is confusing to list only 2 options at first and then list 4 options immediately thereafter. These two sections should be combined into a single section that just identifies the 4 main options.

4. The notice states twice—once in the chart of 4 main options and once in Section VII—that Class Members cannot object to the PAGA settlement. This is incorrect, as they can object—they just cannot opt out.

5. Rather than having Class Members draft their own opt-out requests, objections, and workweek disputes, the notice should include separate forms for each of these processes.

6. In Section VII, the notice states that “[i]f you submit a written objection, you may also choose to attend (or personally retain a lawyer to object at your own cost) the Final Approval Hearing.” This is inappropriate as phrased, as it conditions the Class Member’s ability to attend the Final Approval Hearing upon submission of a written objection first. The Court will generally hear from any Class Members who attend the final approval hearing and ask to speak regarding an objection, irrespective of whether the Class Member submitted a written objection in advance.

7. The notice should state that any Class Member who does not request exclusion may, if the Member so desires, enter an

appearance through counsel. (Cal. Rules of Court [CRC], rule 3.766(d)(5).)

8. The notice should specify that the judgment, “whether favorable or not,” will be binding all Class Members who do not request exclusion. (CRC, rule 3.766(d)(4).)

Issues with Proposed Order The Court has identified several issues with the [Proposed] Preliminary Approval Order. Accordingly, the following issues must also be addressed by Plaintiffs’ counsel before preliminary approval can be granted:

1. As a preliminary note, the [Proposed] Preliminary Approval Order makes zero mention of the FLSA claim, the “FLSA Subclass,” or the FLSA Settlement Fund.

2. The proposed order should be revised to incorporate the relevant revisions identified above, including attaching the revised Class Notice(s).

3. Attorney information must be deleted from the caption page.

4. The date for the preliminary approval hearing should be updated to reference the continued hearing date.

5. The proposed order should reference by name and ROA number all the declaration(s) to which the Settlement Agreement and any amendments thereto are attached.

6. In ¶ 8, the proposed order should specify the names of the Plaintiffs who are provisionally appointed as representatives of the Class.

7. The proposed order should specify all dollar amounts proposed to be allocated from the GSA to attorneys’ fees, litigation costs, enhancement(s), administration costs, and PAGA penalties (including to the LWDA and to Aggrieved Employees).

8. Counsel should not leave blank but should instead propose a realistic Final Approval hearing date, taking into account the deadlines associated with mailing and remailing the notice and responses thereto and the documentation required to support final approval (including but not limited to time records or a summary of time spent by Class Counsel so as to enable the Court to evaluate the lodestar and attorneys’ fee request; detailed litigation cost breakdowns; an Administrator declaration and invoice; and Plaintiff’s declaration to support the enhancement request). The Court usually sets these hearings at least 4 months after preliminary approval of a typical settlement not involving an FLSA claim requiring an opt-in process. All supporting papers must also be filed at least sixteen (16) court days before the Final Approval hearing date.

9. The proposed order should specify the Court’s continuing jurisdiction pursuant to both California Code of Civil Procedure section 664.6 and California Rules of Court, rule 3.769(h).

The Court further refers Plaintiffs’ counsel to the “Guidelines for Approval of Class Action Settlements & PAGA Settlements” posted on

the Court’s website for Department CX102, available at https://voypubapps.occourts.org/complex-civil-calendar.

Plaintiffs’ counsel must file supplemental papers addressing the Court’s concerns no later than sixteen (16) court days prior to the continued hearing date. Counsel must also provide redlined versions of all revised papers and an explanation of how the pending issues were resolved with precise citation to any revisions. A supplemental declaration or brief that simply asserts the issues have been resolved is insufficient and will result in a further continuance. If supplemental papers addressing all of the Court’s concerns cannot be filed by the pre-hearing deadline, counsel must request a continuance. Failure to do so may result in the issuance of an Order to Show Cause re Monetary Sanctions.

Plaintiffs are ordered to give notice of this Court’s ruling, including to the LWDA, within five (5) court days, and file proof of service. 112 Martinez vs. Horizon Lighting, Inc.

2024-01372183 Motion for Preliminary Approval

Plaintiff Jonathan Arce’s Motion for Preliminary Approval of Class Action and PAGA Settlement is CONTINUED to October 22, 2026 at 2:00 p.m. in Department CX102 in order to give Class Counsel an opportunity to address the issues identified below.

This is a putative wage-and-hour class action and PAGA matter.

On 1/12/2024, Plaintiff Daniel Martinez, individually and on behalf of all others similarly situated, filed a class action complaint against Defendant Horizon Lighting, Inc. (ROA #2.) On 2/21/2024, Plaintiff filed a first amended complaint (FAC), adding a cause of action for PAGA penalties. (ROA #14.) On 3/20/2024, Defendant answered the FAC. (ROA #16.)

On 11/20/2025, the operative complaint, i.e., the second amended complaint (SAC), was filed pursuant to the parties’ stipulation filed on 10/30/2025 and the Court’s order entered on 10/31/2025. (ROA #65.) The SAC added Arce as a named Plaintiff and alleges various Labor Code wage-and-hour violations and unfair business practices, including a claim for PAGA penalties. (ROA #65.) On 12/11/2025, Defendant answered the SAC. (ROA #76.)

On 4/14/2026, the Court granted Plaintiffs’ counsel’s motion to be relieved ss counsel to Plaintiff Martinez on 4/14/2026. (ROA #87.) The Court also set an OSC for 5/7/2026 as to why the Court should not strike Martinez’s class claims and PAGA claims for failure to appear through counsel. (Id.) Martinez failed to appear himself or through counsel on 5/7/2026, so the Court found Martinez to be self-represented and that he is no longer permitted to serve as a class representative or otherwise act in a representative capacity for potential aggrieved employees under PAGA. (ROA #95.)

On 5/26/2026, Plaintiff Arce filed the instant Motion for Preliminary Approval of the Class Action and PAGA Settlement, and submitted the