California Court of Appeal Aug 26, 2024 No. E081497MUnpublished
Filed 8/26/24 Loudon v. DHSE CA4/2
NOT TO BE PUBLISHED IN OFFICIAL REPORTS California Rules of Court, rule 8.1115(a), prohibits courts and parties from citing or relying on opinions not certified for publication or ordered published, except as specified by rule 8.1115(b). This opinion has not been certified for publication or ordered published for purposes of rule 8.1115.
IN THE COURT OF APPEAL OF THE STATE OF CALIFORNIA
FOURTH APPELLATE DISTRICT
DIVISION TWO
CLAYTON LOUDON,
Plaintiff and Respondent, E081497
v. (Super.Ct.No. PSC1703855)
DHSE, INC. et al., ORDER MODIFYING OPINION AND DENYING PETITION FOR Defendants and Appellants. REHEARING
[NO CHANGE IN JUDGMENT]
We deny appellant’s petition for rehearing and modify the opinion filed in this
matter on August 8, 2024, as follows:
1. Replace the entire first full paragraph on page 16, which begins with “As to the
joint employment theory,” with the following paragraph:
As to the joint employment theory, defendants contend that “[t]he only
‘alleged violator’” to have “ever employed Clayton Loudon was DHSE, Inc.”
That is not what the operative pleading alleges. In the complaint, Loudon
1
alleged that he “worked for Defendants as a non-exempt employee,” and the
complaint’s definition of “defendants” includes all defendants that executed
the settlement agreement. Loudon did not allege that he worked specifically
for DHSE. Moreover, defendants do not cite any evidence in the record to
support the proposition that only DHSE employed Loudon. Rather, defendants
cite their memorandum of points and authorities filed in opposition to
Loudon’s motion to approve the settlement. Factual assertions in a
memorandum of points and authorities are not evidence. (Smith, Smith &
Kring v. Superior Court (1997) 60 Cal.App.4th 573, 578.) Although we are
not obliged to search the record unguided (Meridian Financial Services, Inc. v.
Phan (2021) 67 Cal.App.5th 657, 684), we note that the factual assertion in the
memorandum of points and authorities is not supported by any evidence. None
of the attorneys attested that Loudon worked exclusively for DHSE. The
argument concerning the joint employment theory is not supported by the
record and therefore fails.
2. At line 2 on page 19, insert “fails” after “The argument” and delete the
remainder of the paragraph so the second sentence of the paragraph reads:
“The argument fails.” Also delete “Moreover,” at the beginning of the next
paragraph and remove the paragraph break between the two paragraphs.
2
Except for these modifications, which do not affect the judgment, the opinion
remains unchanged.
NOT TO BE PUBLISHED IN OFFICIAL REPORTS
MENETREZ J.
We concur:
RAMIREZ P. J.
McKINSTER J.
3
Filed 8/8/24 Loudon v. DHSE CA4/2 (unmodified opinion)
NOT TO BE PUBLISHED IN OFFICIAL REPORTS California Rules of Court, rule 8.1115(a), prohibits courts and parties from citing or relying on opinions not certified for publication or ordered published, except as specified by rule 8.1115(b). This opinion has not been certified for publication or ordered published for purposes of rule 8.1115.
IN THE COURT OF APPEAL OF THE STATE OF CALIFORNIA
FOURTH APPELLATE DISTRICT
DIVISION TWO
CLAYTON LOUDON,
Plaintiff and Respondent, E081497
v. (Super.Ct.No. PSC1703855)
DHSE, INC. et al., OPINION
Defendants and Appellants.
APPEAL from the Superior Court of Riverside County. Harold W. Hopp, Sharon
J. Waters, Sunshine S. Sykes, Judges. Affirmed.
The Law Offices of Timothy D. Murphy and Timothy D. Murphy, for Defendants
and Appellants.
GrahamHollis, Graham S.P. Hollis, Nathan Reese; Irvine Bidgoli and Rod Bidgoli
for Plaintiff and Respondent.
1
This appeal arises from the settlement of a representative action under the Labor
Code Private Attorneys General Act of 2004 (PAGA) (Lab. Code, § 2698 et seq.;
unlabeled statutory references are to this code). In August 2019, DHSE, Inc. (DHSE),
PSTPS, Inc., DHSL, LLC, DHSO, Inc., AACAL, Inc., ERS, LLC, and Michael Bickford
(collectively, defendants) settled a PAGA action with plaintiff Clayton Loudon. Months
after defendants executed the agreement settling the PAGA claims, defendants objected
to court approval of the agreement, arguing that the agreement was “unjust, arbitrary,
oppressive, and confiscatory” for various reasons. Defendants also argued that the
amount of attorney fees allocated in the agreement to Loudon’s attorneys was excessive.
The trial court overruled defendants’ objections and approved the settlement, including
its allocation of attorney fees. On appeal, defendants challenge the trial court’s approval
of the agreement. We reject defendants’ arguments and affirm the judgment.
BACKGROUND
I. The Complaint and Mediation
In July 2017, Loudon filed a complaint against defendants, alleging that he worked
as a nonexempt employee for “[d]efendants,” whom he referred to as his “former
employers and/or joint employers.” The complaint did not contain any allegations
concerning the timeframe of Loudon’s employment or his specific job. The complaint
contained nine causes of action against defendants in which Loudon asserted individual
claims for (1) various Labor Code violations, including that defendants failed to pay him
2
overtime compensation and did not adequately provide off-duty meal and rest periods, (2)
unfair business practices, and (3) unlawful retaliation.
The complaint also included a representative claim for civil penalties under
PAGA. With respect to the PAGA claim, Loudon alleged that defendants “violated and
continue to violate provisions” of the Labor Code and applicable wage orders concerning
payment of wages. Loudon mailed a copy of the PAGA complaint to the Labor and
Workforce Development Agency (LWDA) in April 2017, and the LWDA did not assume
jurisdiction over the matter.
The parties agreed to participate in private mediation.1 In anticipation of that
mediation, defendants provided Loudon with various records, including employment
policies, Loudon’s complete employee file, and the “time and payroll for 480 of
Defendants’ employees . . . (since June 9, 2015).” The parties’ attorneys “analyzed,
researched, and investigated the potential issues, including matters related to the
calculation of damages, trial, and appellate issues and risks.”
The parties attended mediation in March 2019 with a mediator knowledgeable
about California wage and hour law. Following over 13 hours of mediation, the parties
settled all of the individual and PAGA claims. In May 2019, defendants retained new
1 We take the facts concerning the mediation from the declaration of Loudon’s attorney filed in support of the motion to approve the settlement. Defendants’ attorney asserted in opposition that “multiple aspects” of Loudon’s attorney’s declaration were “misstated,” but defendants’ attorney did not dispute any of the basic facts about the mediation process.
3
counsel. The parties continued negotiations for several additional months and in August
2019 executed both an “Individual Settlement Agreement and Mutual Release of Claims”
and a “Private Attorneys General Act Settlement Agreement and Limited Release of
Claims” (the PAGA settlement agreement or the agreement). Loudon’s attorneys
submitted the PAGA settlement agreement to the LWDA in October 2019.
II. The PAGA Settlement Agreement
The PAGA settlement agreement contains recitals of the facts on which the
settlement was based, including that Loudon was “a former employee of Defendants”
“from approximately December 2014 to September 23, 2016.” The parties
acknowledged and agreed that the agreement constituted a compromise of Loudon’s
PAGA claims and that the parties desired and intended the settlement “to effect a final
and complete resolution of the Action and all representative claims pursuant to the PAGA
that [Loudon] and/or the Aggrieved Employees may have against Defendants for PAGA
penalties.” The agreement defined “Aggrieved Employees” to “mean any employee of
Defendants who has worked for Defendants from April 20, 2016 to the Effective Date,”
which in turn was defined as the “date the Court approves this PAGA Settlement
Agreement.”
The parties entered the PAGA settlement agreement “in order to avoid [the]
additional cost and the uncertainty of litigation.” They “desire[d] to resolve all PAGA
claims and claims for recovery of penalties against the Defendants, both known and
unknown, as of the date of the execution of this PAGA Settlement Agreement.” The
4
parties agreed that the settlement agreement “provides for a reasonable resolution of the
PAGA Claims that accomplishes the deterrent purposes of the PAGA, and have arrived at
the settlement in extensive, arms-length negotiations, taking into account all relevant
factors, present and potential.”
Defendants agreed to settle Loudon’s individual claims for $150,000 and the
PAGA claims for $650,000, with 75 percent to be paid to the LWDA and 25 percent
distributed to the aggrieved employees. Under both agreements, defendants agreed to
make six installment payments of $133,333.33, to begin after the court approved the
settlement. With respect to attorney fees, the parties agreed that Loudon’s attorneys
“shall be entitled to receive attorney’s fees in an amount equal to one-third of the PAGA
Settlement Sum,” subject to the court’s approval of the settlement.
Loudon individually and on behalf of the LWDA agreed to release “any and all
claims seeking civil penalties under the California Labor Code predicated on the PAGA
Claims asserted in the Action, during the PAGA Timeframe against Defendants . . . .”
The PAGA timeframe was “defined as the period of April 20, 2016 to the Effective
Date.”
III. Loudon’s Motion to Approve the PAGA Settlement Agreement
The PAGA settlement agreement required defendants to prepare a joint motion for
court approval of the settlement, but defendants never prepared that motion. In January
2020, defendants opposed a motion to approve the settlement, even though no such
5
motion was pending. Defense counsel explained that he had prepared the opposition in
anticipation of Loudon filing a motion to approve the settlement.
In June 2020, Loudon moved the court to approve the PAGA settlement
agreement, arguing that it was “fundamentally fair and reasonable.” The motion was
supported by declarations from two of Loudon’s attorneys—Rod Bidgoli and Vilmarie
Cordero—with the settlement agreements attached as exhibits.
According to Bidgoli, the agreement “was reached through informed, arms-length
bargaining,” and “the parties agree[d] that the instant settlement is fair and reasonable
based upon the disputed strength of the PAGA claims, the range of outcomes in the
litigation, the risk, expense and complexity of further litigation, the scope of the release,
and the experience and views of counsel and the mediator.”
In explaining why the PAGA settlement agreement should be approved, Bidgoli
described the period covered by the agreement, the number of aggrieved employees, and
the aggregate number of violations as follows: “The parties[’] PAGA Settlement
Agreement covers the Period from June 20, 2016 through the date the Court approves the
parties’ settlement. As of the parties’ mediation in March 2019, Defendants indicated
that they had a total of 480 employees, representing a total of 11,629 pay periods.”
Bidgoli attested that defendants had 860 current and former employees “[a]ccording to
the information most recently provided by Defendants.”
6
Bidgoli described the total civil penalty exposure that defendants faced for each of
the alleged PAGA claims, given the information available when the parties mediated.
Loudon’s counsel had calculated the rate of meal and rest break violations to be 39
percent and 75 percent, respectively, on the basis of “a review of Defendants’ record[s]”
and “based on interviews with [Loudon] and other aggrieved employees” for the rest
period violations. By reviewing defendants’ records, Loudon’s counsel had determined
that about 31 percent of defendants’ employees worked over eight hours per day, and
Loudon’s counsel assumed that 100 percent of the employees who worked over eight
hours were not paid overtime. With respect to the wage statement violations and the
inadequate compensation of terminated employees, Loudon’s counsel assumed the same
31 percent rate of violation, because the claims were derivative of the overtime claim.
Based on those “assumptions and analysis of the records provided by Defendants,
[Loudon’s] Counsel estimate[d] that Defendants’ total potential exposure for civil
penalties under PAGA is $1,587,569.” Bidgoli stated that the settlement of $650,000 for
the PAGA claims represented 41 percent of defendants’ penalty exposure estimated from
“review and analysis of the records provide[d] by Defendants.”
Bidgoli stated that he believed that “the possibility of recovering such a large
amount [was] remote, particularly in light of the relative strength of Defendants’
defenses” and certain specified difficulties that the parties agreed that Loudon might face
in proving the PAGA claims. Bidgoli believed that Loudon had a 50 percent chance of
succeeding on the PAGA claims, so he reduced the value of the total potential civil
7
penalties to $793,784. In addition, Bidgoli believed that “it was very likely that, given
the attenuated nature of some of the claims, the Court would, in its discretion, limit the
award because it was unjust, arbitrary and oppressive, or confiscatory. As such,
[Loudon] estimate[d] that it [was] possible that [the trial court could] further reduce the
civil penalties under PAGA by as much [as] 50% or more, which further reduces the
value of [Loudon’s] representative claims for civil penalties to $396,892.” Bidgoli
proposed that the net settlement of $433,333.34, which included approximately $22,000
for litigation costs and administering the settlement, “represent[ed] a fair and reasonable
settlement of these highly disputed claims.” Of that amount, Bidgoli explained that 860
employees would share the 25 percent allocated to aggrieved employees, resulting in
approximately $120 per aggrieved employee.
With respect to attorney fees, Bidgoli explained that “the Parties allocated one-
third of the Settlement Amount to [Loudon’s] counsel for reasonable attorneys’ fees, plus
actual litigation costs” because of “the efforts and substantial risk undertook in obtaining
a common fund settlement that benefits the LWDA and Aggrieved Employees.” Bidgoli
explained that if the matter proceeded to trial Loudon would be entitled to recover
attorney fees and costs, which Bidgoli estimated could range between $200,000 and
$300,000 for the individual claims alone. Through the date of the declaration, Bidgoli’s
firm had spent over 200 hours litigating the case, and he attested that his “firm’s lodestar
currently exceeds $139,000,” based on an hourly rate of $695 per hour. Bidgoli’s firm
associated into the case in March 2020.
8
Cordero is a partner at another law firm representing Loudon. She attested that
she believed that the PAGA settlement agreement was “fair and reasonable considering
the highly disputed nature of the claims and the risks and expense involved in continued
litigation.” She determined that the settlement was fair “based on a number of factors,
including an investigation of the applicable law as it applied to the facts discovered, the
maximum potential civil penalties recoverable for [Loudon’s] representative claims, as
well as Defendants’ potential defenses thereto.” Cordero described the work that her firm
had done and the hourly rate of the attorneys involved. She attested that the “firm’s
lodestar is currently $87,093.”
Defendants opposed the motion. In their memorandum of points and authorities,
defendants claimed that Loudon “worked as a ‘Network Assistant’ in the IT department
at Desert Hot Springs (DHSE, Inc.) from December 6, 2014 until September 23, 2016.”
Defendants argued that the settlement should not be approved, because (1) the PAGA
settlement agreement violated the Supreme Court’s holding in ZB, N.A. v. Superior Court
(2019) 8 Cal.5th 175 (ZB) (issued after the parties’ settled) by allowing aggrieved
employees to recover unpaid wages, (2) Loudon lacked standing to bring a PAGA suit
against any defendant other than DHSE because the complaint does not properly plead a
joint-employer theory, (3) Loudon has standing to represent aggrieved employees only
during his period of employment, (4) Loudon can recover civil penalties from aggrieved
employees only from July 2016 through September 23, 2016—the end of Loudon’s
termination—because the complaint was filed in July 2017 and the limitations period for
9
PAGA claims is one year, and (5) the settlement is unjust, arbitrary, oppressive, and
confiscatory. Defendants also challenged the amount of attorney fees on several grounds.
Defendants’ attorney, Timothy Murphy, filed a declaration in support of the
opposition. Murphy asserted that the declarations from Bidgoli and Cordero “are
misstated in multiple aspects.” With respect to Bidgoli’s declaration, Murphy asserted
that Bidgoli’s statement that “‘up to one-third’” of the settlement should be allocated to
attorney fees is “contrary to California law.” With respect to Bidgoli’s statement that
“‘the settlement was reached through informed and arms-length bargaining,’” Murphy
countered that the law had materially changed since the settlement and Bidgoli’s
calculation of the number of aggrieved employees was erroneous. Specifically, Murphy
attested that Bidgoli’s claim that defendants’ had 860 total current and former employees
was not true. Murphy attested: “To the contrary, the cohort of possible ‘aggrieved
employees,’ depending upon the length of the ‘violations period,’ is less than 77 and
possibly fewer than 49.” In addition, Murphy pointed out that Bidgoli “provide[d]
absolutely no accounting for his estimate” of defendants’ total exposure for PAGA
penalties.
IV. Approval of the PAGA Settlement Agreement and Further Proceedings
Following a hearing in July 2020, the trial court granted Loudon’s motion to
approve the PAGA settlement agreement, finding the settlement to be fair, reasonable,
and adequate with respect to the underlying purposes of the PAGA statute. The court
found none of defendants’ arguments meritorious. As to defendants’ claim that the
10
PAGA settlement agreement included unpaid wages in violation of ZB, supra, 8 Cal.5th
175, the court found that nothing in the agreement indicated that its relief for the PAGA
claims was not limited to civil penalties, and Bidgoli’s declaration confirmed that the
settlement was based on a calculation of possible civil penalties.
At the hearing, defendants argued that there were mutual mistakes of fact and law
that warranted rescission of the agreement. The court rejected the argument, noting that
defendants had not filed a “motion or action to rescind the settlement.” The court
reasoned that defendants “were fully represented at the mediation, fully represented when
they signed the agreement. They are bound by the agreements they sign. I am not going
to look at how many aggrieved members there are or are not based on an allegation that
there have been releases. That was something that, if it was in existence at the time of the
mediation, should have been factored . . . into the parties’ settlement discussions at
mediation. It’s not a basis to undo this settlement or to conclude that because it includes
more aggrieved members that somehow that it makes it oppressive or confiscatory . . . or
somehow unfair or unreasonable.”
In July 2020, the court issued an order granting Loudon’s motion to approve the
PAGA settlement and entered judgment resolving both the PAGA claims and the
individual claims. The court reserved jurisdiction over certain issues. (Loudon v. DHSE,
Inc. (Nov. 17, 2022, B322559) [nonpub. opn.].) At the hearing, both counsel had agreed
to entry of judgment rather than dismissal should the court approve the settlement.
11
After judgment was entered, defendants moved to vacate the judgment, arguing
that their attorney had agreed to entry of judgment without their permission. The court
granted the motion on the basis of the attorney’s excusable neglect. The court ordered:
“Because the PAGA settlement calls for a series of payments to be made by defendants—
dismissal at this time is not appropriate. Rather—dismissal should be entered only after
defendants have fully complied with the settlement.” The court ordered that if defendants
failed to make timely payments, then Loudon could seek entry of judgment under Code
of Civil Procedure section 664.6.2
Defendants made the first two installment payments in July and October 2020. In
March 2023, Loudon moved for entry of judgment because defendants had failed to make
the remaining installment payments. The court granted the motion and entered judgment
against defendants in May 2023. The judgment indicated that defendants had paid only
two of the six installment payments required under the agreement and that defendants
were “still obligated to pay $533,333.34” to a third-party administrator. The court
awarded attorney fees as allocated in the agreement as follows: “$216,666.67 or 1/3 of
the $650,000.00 in attorneys’ fees to be paid from the PAGA Settlement Amount to
Plaintiff’s counsel of record.”
2 Defendants appealed from the trial court’s order and also filed a petition for writ of mandate concurrently with their opening brief in the appeal. (Loudon v. DHSE, Inc., supra, B32259.) The Second District dismissed the appeal and denied the writ petition as untimely. (Ibid.)
12
DISCUSSION
Defendants contend that the trial court abused its discretion by approving the
PAGA settlement agreement, and they challenge the attorney fee award. Defendants also
contend that the court erred by not rescinding the agreement. We are not persuaded.
I. PAGA
“The Legislature enacted the PAGA in 2003 after deciding that lagging labor law
enforcement resources made additional private enforcement necessary ‘“to achieve
maximum compliance with state labor laws.”’” (ZB, supra, 8 Cal.5th at p. 184.) PAGA
empowers employees to sue employers individually and on behalf of other aggrieved
employees to recover civil penalties for most Labor Code violations. (ZB, at p. 185.)
“All PAGA claims are ‘representative’ actions in the sense that they are brought on the
state’s behalf. The employee acts as ‘“the proxy or agent of the state’s labor law
enforcement agencies”’ and ‘“represents the same legal right and interest as”’ those
agencies—‘“namely, recovery of civil penalties that otherwise would have been assessed
and collected by the Labor Workforce Development Agency.”’ [Citation.] The
employee may therefore seek any civil penalties the state can, including penalties for
violations involving employees other than the PAGA litigant herself.” (Ibid.) Aggrieved
employees cannot recover unpaid wages under PAGA. (ZB, at p. 198.)
“Once an aggrieved employee files a PAGA lawsuit, the statutory scheme
recognizes that the employee may settle that lawsuit on behalf of the state. (§ 2699,
subds. (a) & (l)(2).)” (Moniz v. Adecco USA, Inc. (2021) 72 Cal.App.5th 56, 78 (Moniz),
13
disapproved on another ground in Turrieta v. Lyft, Inc. (Aug. 1, 2024, S271721) __
Cal.5th __ [2024 Cal. Lexis 4156].) “If an aggrieved employee settles such an action, the
trial court must review and approve the settlement, and the civil penalties are distributed
75 percent to the LWDA and 25 percent to the aggrieved employees.” (Id. at p. 64; §
2699, subds. (i), (l)(2).) When an aggrieved employee settles a PAGA action, the statute
provides: “The superior court shall review and approve any settlement of any civil action
filed pursuant to this part.” (§ 2699, subd. (l)(2) (§ 2699(l)(2); Moniz, at p. 78.)
In reviewing a PAGA settlement, the trial court “should evaluate [it] to determine
whether it is fair, reasonable, and adequate in view of PAGA’s purposes to remediate
present labor law violations, deter future ones, and to maximize enforcement of state
labor laws.” (Moniz, supra, 72 Cal.App.5th at 77.) The court is vested with broad
discretion in making that determination. (Id. at p. 76.) In ascertaining the fairness of a
PAGA settlement, the trial court may consider many of the same factors used to evaluate
the fairness of class action settlements, “including the strength of the plaintiffs’ case, the
risk, the stage of the proceeding, the complexity and likely duration of further litigation,
and the settlement amount.” (Moniz, at p. 77.)
We review for abuse of discretion the trial court’s approval of a PAGA settlement.
(Moniz, supra, 72 Cal.App.5th at p. 78.) “We review the trial court’s findings of fact for
substantial evidence and its conclusions of law de novo.” (Ibid.) We examine the
evidence in the light most favorable to the prevailing party and do not reweigh the
14
evidence or reconsider credibility determinations. (In re Marriage of Calcaterra &
Badakhsh (2005) 132 Cal.App.4th 28, 34.)
II. The Settlement Agreement’s Relationship to the Complaint
Defendants challenge the trial court’s approval of the PAGA settlement agreement
on several grounds relating to the relationship between the agreement and the claims
alleged in the operative pleading. The arguments lack merit.3
Defendants argue that the trial court abused its discretion by approving the PAGA
settlement agreement because Loudon’s complaint did not properly plead “a ‘joint
employment’ theory.” Defendants contend that in light of that purported failure Loudon
could not use that theory “as a basis to reasonably ‘estimate’ the total number of
defendant DHSE, Inc.’s employee cohort” as part of the settlement compromise.
Defendants likewise argue that because Loudon did “not properly plead post-filing
violations” in the complaint, it was improper for the agreement to include civil penalties
for violations three years beyond the complaint’s filing date. Defendants similarly argue
that the trial court abused its discretion by approving the PAGA settlement agreement
because Loudon lacked standing to pursue PAGA claims for any violations that occurred
after his period of employment. Relatedly, defendants argue that Loudon could recover
PAGA penalties only from July 2016 through the end of his employment in September
3 Defendants also argue that Loudon’s motion to approve the PAGA settlement agreement did not comply with the court’s case management order. The argument is forfeited because defendants did not make it in the trial court. “‘[I]t is fundamental that a reviewing court will ordinarily not consider claims made for the first time on appeal which could have been but were not presented to the trial court.’” (Newton v. Clemons (2003) 110 Cal.App.4th 1, 11 (Newton).)
15
2016, because the complaint was filed in July 2017 and the applicable statute of
limitations for a PAGA claim is one year.
As to the joint employment theory, defendants contend that “[t]he only ‘alleged
violator’” to have “ever employed Clayton Loudon was DHSE, Inc.” That is not what
the operative pleading alleges. In the complaint, Loudon alleged that he “worked for
Defendants as a non-exempt employee,” and the complaint’s definition of “defendants”
includes all defendants that executed the settlement agreement. Loudon did not allege
that he worked specifically for DHSE. Moreover, defendants do not cite any evidence in
the record to support the proposition that DHSE employed Loudon. Rather, defendants
cite their memorandum of points of authorities filed in opposition to Loudon’s motion to
approve the settlement. Factual assertions in a memorandum of points and authority are
not evidence. (Smith, Smith & Kring v. Superior Court (1997) 60 Cal.App.4th 573, 578.)
Although we are not obliged to search the record unguided (Meridian Financial Services,
Inc. v. Phan (2021) 67 Cal.App.5th 657, 684), we note that the factual assertion in the
memorandum of points and authorities is not supported by any evidence. None of the
attorneys attested that Loudon worked for DHSE specifically. The argument concerning
the joint employment theory is not supported by the record and therefore fails.
Defendants’ challenge to the court’s approval of the PAGA settlement agreement
based on the allegations in the complaint or the limitations period applicable to the claims
pled is similarly unsupported. Defendants have not articulated any reason why the
parties’ settlement agreement had to be limited by the allegations in the complaint.
16
Rather, throughout the opening brief, defendants assume that the allegations in the
complaint somehow affected or acted as a constraint on the parties’ settlement agreement.
Because defendants have not supported that assumption with any legal analysis or
authority, the arguments based on that underlying assumption are forfeited. (Hernandez
v. First Student, Inc. (2019) 37 Cal.App.5th 270, 277 (Hernandez).)
In any event, defendants’ attempt to use the complaint to limit the permissible
scope of the parties’ settlement is legally erroneous. Because a settlement agreement is a
contract, the legal principles generally applicable to contracts apply to settlement
agreements. (Weddington Productions, Inc. v. Flick (1998) 60 Cal.App.4th 793, 811.)
Contracting “parties may contract as they please so long as they do not violate the law or
public policy.” (Linnastruth v. Mutual Ben. Health & Acci. Asso. (1943) 22 Cal.2d 216,
218 (Linnastruth).) Like every contract, a settlement agreement must have “[a] lawful
object” (Civ. Code, §§ 1550, 1596) and cannot contravene public policy (Tri-Q, Inc. v.
Sta-Hi Corp. (1965) 63 Cal.2d 199, 218) or “a law established for a public reason” (Civ.
Code, § 3513). (Abramson v. Juniper Networks, Inc. (2004) 115 Cal.App.4th 638, 658.)
Defendants fail to identify any principle of contract law that requires the parties
settling an action to limit the scope of the settlement to what the plaintiff alleged in the
operative pleading. Nor are we aware of any such legal principle. The parties were free
to settle whatever they wanted so long as the agreement did not violate the law or public
policy, regardless of the allegations in the complaint. (Linnastruth, supra, 22 Cal.2d at
p. 218; Series AGI West Linn of Appian Group Investors DE, LLC v. Eves (2013) 217
17
Cal.App.4th 156, 164 [“A bedrock principle of contract law in California has always been
that competent parties should have ‘“‘the utmost liberty of contract’”’ to arrange their
affairs according to their own judgment so long as they do not contravene positive law or
public policy”].) In the present case, providing relief to more employees than could have
been covered by the allegations in the complaint does not contravene public policy or a
law established for a public reason. Instead, providing relief to more employees furthers
the purpose of PAGA to protect the public interest by compensating more employees
who have been adversely affected by Labor Code violations (Moniz, supra, 72
Cal.App.5th at p. 77) and by assessing greater civil penalties against defendants to act as
a “‘“meaningful deterrent to unlawful conduct”’” (id. at p. 69).
For these reasons, we reject defendants’ arguments that the trial court abused its
discretion by approving the PAGA settlement agreement because the scope of settlement
should have been limited to the allegations of the complaint.
III. Sufficiency of the Evidence
Defendants also challenge the trial court’s approval of the PAGA settlement
agreement on several grounds relating to the sufficiency of the evidence supporting the
trial court’s finding that the agreement was fair, reasonable, and adequate with respect to
the underlying purposes of PAGA. The arguments lack merit.
Defendants argue that the trial court’s review of the PAGA settlement agreement
was inadequate under section 2699(l)(2) because the court did not receive, consider, or
demand evidence supporting “core legal issue[s],” such as the selected violations period
18
and “the number of non-employees upon an unpleaded ‘joint employment’ theory to
include as allegedly represented ‘aggrieved employees.’” The argument is forfeited
because defendants do not provide any legal analysis or cite any legal authority
supporting the proposition that Loudon had to submit evidence showing why the parties
agreed to the chosen settlement period or agreed to settle PAGA claims for employees of
all named defendants during that period. (Hernandez, supra, 37 Cal.App.5th at p. 277.)
Moreover, Loudon’s motion was supported by declarations from two of his
attorneys. As Bidgoli explained, defendants provided Loudon’s attorneys with the
employee records for 480 employees before the mediation in March 2019. Those records
covered the period starting in June 2015. Bidgoli signed his declaration in June 2020,
and he attested that defendants had recently informed Loudon’s counsel that defendants’
current and former employees totaled 860. That constitutes sufficient evidence showing
that the number of aggrieved employees covered by the agreement is fair and reasonable.
Defendants counter that Bidgoli’s “declaration failed to proffer substantive,
reliable evidence to support the reasonableness of the settlement.” In support of that
argument, defendants point out that their attorney (Murphy) provided different
calculations based on the number of DHSE’s employees and a violations period that
covered Loudon’s period of employment. The argument shows at most that there was
conflicting evidence concerning certain variables underlying the agreement. The mere
existence of conflicting evidence does not render Bidgoli’s declaration unreliable or show
that the trial court’s finding of reasonableness is not supported by substantial evidence.
subd. (b)(1), 1567, subd. (5), 1576-1578.) The parties must share the same
misconception in order for the mistake to be mutual. (Renshaw v. Happy Valley Water
Co. (1952) 114 Cal.App.2d 521, 524 (Renshaw); Crocker-Anglo Nat’l Bank v. Kuchman
(1964) 224 Cal.App.2d 490, 496.) The party claiming that there was a mutual mistake
carries the burden of establishing “it by clear and convincing evidence.” (Martinelli v.
Gabriel (1951) 103 Cal.App.2d 818, 823 (Martinelli).)
Defendants contend that the PAGA settlement agreement is based on “multiple
mutual mistakes of fact and law” that warrant rescission. In particular, defendants argue
that (1) Loudon “wrongly persuaded defendants and the trial court, that the ‘relevant
employment period’. . . lasted for a period from between June 20, 2016 and ‘the date the
court approves the parties’ settlement’” and (2) this “mistake of law was compounded by
a mistake of fact created by [Loudon’s] suggestion without proof, that there was a total of
11,629 pay periods for 480 aggrieved employees,” while “defendants contended
variously that there was a cohort of 96 employees and 384 pay periods [citation.]; or ‘less
than 77 and possibly fewer than 49.’”
The arguments are meritless. Defendants did not introduce any evidence in the
trial court demonstrating that the parties shared any mistaken perception of the law or the
facts when they entered the contract. The only evidence that defendants submitted in
opposing the motion to approve the settlement agreement was a declaration from their
attorney. The declaration contained claims about how many employees worked for
DHSE during a shorter period than the covered settlement period. Those claims have no
25
tendency to show that the parties shared a mistaken belief about the number of aggrieved
employees when they entered the agreement. (Renshaw, supra, 114 Cal.App.2d at
p. 524.) Having submitted no evidence concerning a shared misconception of fact or law
by the parties, defendants failed to carry their burden in the trial court of demonstrating
by clear and convincing evidence that the contract should be rescinded on the basis of a
mutual mistake of fact or law.4 (Martinelli, supra, 103 Cal.App.2d at p. 823.)
DISPOSITION
The judgment is affirmed. Loudon shall recover his costs of appeal.
NOT TO BE PUBLISHED IN OFFICIAL REPORTS
MENETREZ J.
We concur:
RAMIREZ P. J.
McKINSTER J.
4 Defendants also argue that the trial court erred by declining to address their rescission claim on the merits because it was not brought by separate motion. Assuming for the sake of argument that the trial court thereby erred, the error was harmless for the reasons already given, because defendants’ rescission claim was substantively unsupported.
26
AI Brief
AI-generated · verify before citing
Holding. The court affirmed the trial court's approval of a PAGA settlement, holding that the defendants' challenges to the settlement's validity—including arguments regarding joint employment, standing, and the scope of the release—were unsupported by the record or legally meritless.
Issues
Whether the trial court abused its discretion in approving a PAGA settlement agreement.
Whether the settlement agreement was invalid due to the plaintiff's alleged failure to properly plead a joint-employment theory.
Whether the trial court erred in rejecting the defendants' arguments regarding standing and the scope of the PAGA release.
Disposition. affirmed
Quotations verified verbatim against the opinion
“The argument concerning the joint employment theory is not supported by the record and therefore fails.”
“We reject defendants’ arguments and affirm the judgment.”