Case Number: BC674940 Hearing Date: August 22, 2018 Dept: 50

Superior Court of California

County of Los Angeles

Department 50

jose canul,

Plaintiff,

vs.

basmat, inc., et al.,

Defendants.

Case No.:

BC 674940

Hearing Date:

August 22, 2018

Hearing Time:

8:30 a.m.

[TENTATIVE] ORDER RE:

PLAINTIFF’S MOTION FOR SETTLEMENT APPROVAL OF CLAIMS BROUGHT UNDER THE PRIVATE ATTORNEYS’ GENERAL ACT AND REASONABLE ATTORNEYS’ FEES, COSTS, AND INCENTIVE PAYMENT

Factual Background

Plaintiff Jose Canul (“Canul”) initiated this action individually and on behalf of the State of California, as a private attorney general on September 6, 2017 against Defendant Basmat, Inc. dba McStarlite. (“McStarlite”). The Complaint asserts one cause of action for civil penalties under Labor Code section 2699 et seq. (“PAGA”) for failure to pay all minimum and overtime wages, failure to provide required meal periods, failure to authorize and permit rest periods, failure to reimburse expenses, and failure to include its legal name on employee wage statements.

The parties agreed to mediate, and in preparation for mediation, exchanged information and data, including McStarlite’s providing Canul with the number of potential Aggrieved Employees[1] as well as a spreadsheet containing each employee’s department, hourly rate, hire date and termination date. (Haines Decl., ¶ 12.) As a result of the mediation, the parties reached a settlement. (Haines Decl., ¶ 13.)

Canul now moves for approval of the settlement. The motion is unopposed.

Discussion

A superior court must “review and approve any settlement of any civil action filed pursuant to this part.” (Lab. Code, § 2699(l)(2).)

As noted by Canul, there is no statutory or common law standard for approval of a PAGA settlement, therefore, the Court finds that the standards used for approval of class action settlements to be instructive. “[A] presumption of fairness exists where: (1) the settlement is reached through arm’s-length bargaining; (2) investigation and discovery are sufficient to allow counsel and the court to act intelligently; (3) counsel is experienced in similar litigation; and (4) the percentage of objectors is small.” (Dunk v. Ford Motor Co. (1996) 48 Cal.App.4th 1794, 1802.) The last factor, small percentage of objectors, is inapplicable to PAGA claims. (See Arias v. Superior Court (2009) 46 Cal.4th 969, 984-985 [rejecting the argument that representative actions under PAGA violate the due process rights of “nonparty aggrieved employees who are not given notice of, and an opportunity to be heard”].)

The Court is satisfied that the parties reached the settlement through arm’s-length bargaining and that the parties engaged in substantive discovery. (See Haines Decl., ¶¶ 12-13.) The Court is also satisfied that counsel is experienced in similar litigation. (See Haines Decl., ¶¶ 2-9; Shim Decl., ¶¶ 2-4; Korobkin Decl., ¶¶ 2-5.) Therefore, the Court finds that the settlement is entitled to a presumption of fairness.

“The proposed settlement shall be submitted to the [Labor and Workforce Development Agency] at the same time that it is submitted to the court.” (Lab. Code

§ 2699(l)(2).) Based on the declarations and evidence submitted, the settlement does not appear to have been provided to the California Labor and Workforce Development Agency (“LWDA”). Therefore, prior to approval of the settlement, the Court will require some evidence that the settlement has been submitted to the LWDA.

“[C]ivil penalties recovered by aggrieved employees shall be distributed as follows: 75 percent to the Labor and Workforce Development Agency for enforcement of labor laws, including the administration of this part, and for education of employers and employees about their rights and responsibilities under this code, to be continuously appropriated to supplement and not supplant the funding to the agency for those purposes; and 25 percent to the aggrieved employees.” (Lab. Code, § 2699(i).) The settlement provides that McStarlite will pay a non-reversionary Gross Settlement Amount of $460,000. (Haines Decl., Ex. 2, § III.2.) After deducting amounts for requested attorneys’ fees and costs, Canul’s Incentive Payment, and administration costs, the settlement provides for distribution of the remaining Net Settlement Amount to Aggrieved Employees and the LWDA, as follows: 1/3 of the Net Settlement Amount to Aggrieved Employees, and 2/3 of the Net Settlement Amount is to be designated “2699 Civil Penalties,” which will be distributed 75% to the LWDA and 25% to Aggrieved Employees. (Haines Decl., Ex. 2, § III.5; see Thurman v. Bayshore Transit Management, Inc. (2012) 203 Cal.App.4th 1112, 1144 [finding that Labor Code section 558 provides for a civil penalty that consists of both $50 or $100 penalties and any underpaid wages, with the underpaid wages going entirely to the affected employees].) The Court finds that the settlement is compliant with Labor Code section 2699(i).

Additional factors that are useful to consider here are the factors to evaluate the reasonableness of a class action settlement agreement, which includes the strength of a plaintiff’s case, the risk, expense, complexity and likely duration of further litigation, the amount offered in settlement, the extent of discovery completed, and the experience and views of counsel. ((See Kullar v. Foot Locker Retail, Inc. (2008) 168 Cal.App.4th 116, 128.) The Court has already discussed the extent of discovery and experience of counsel and has found that those factors militate in favor of approval of the settlement.

In terms of the risks of litigation and strength of the case, counsel for Canul submits that McStarlite has proffered defenses that are possibly meritorious. McStarlite’s policy of rounding employee time to the nearest quarter-hour is purportedly neutral on its face, and there was competent evidence showing that employees did not start working until a bell sounded despite clocking in earlier than the bell. (Haines Decl., ¶ 18.) McStarlite also had a defense to the claim for failure to include all nondiscretionary bonuses in the regular rate of pay because there was competent evidence that the only bonuses paid were Christmas bonuses, which are not included in the regular rate. (Haines Decl., ¶ 19.) With respect to the meal and rest period violations, McStarlite produced evidence that employees did take meal and rest periods for the appropriate amount of time. (Haines Decl., ¶ 20.) Finally, McStarlite asserted that it honors all reasonable reimbursement requests and that using a DBA is compliant with the relevant Labor Code section. (Haines Decl., ¶¶ 21-22.) In light of the foregoing, the Court finds that there is a possibility that McStarlite would prevail in this action, and that the risk, expense, complexity, and likely duration of further litigation militate in favor of a finding that the settlement is reasonable.

A prevailing employee is entitled to an award of reasonable attorney fees and costs incurred in the action. (Lab. Code, § 2699(g)(1).) California Rules of Court, rule 3.769(b) requires that “[a]ny agreement… with respect to the payment of attorney’s fees or the submission of an application for the approval of attorney’s fees must be set forth in full in any application for approval of the dismissal or settlement of an action that has been certified as a class action.” Despite any agreement by the parties to the contrary, “the court ha[s] an independent right and responsibility to review the attorney fee provision of the settlement agreement and award only so much as it determined reasonable.” (Garabedian v. Los Angeles Cellular Telephone Co. (2004) 118 Cal.App.4th 123, 128.) With respect to attorneys’ fees and costs, the parties agree that 1/3 of the Gross Settlement Amount will go to attorneys’ fees and $15,716.20 will go to costs. (Haines Decl., Ex. 2, § III.4.a; Haines Decl., ¶¶ 15-16, Ex. 3.) The Court finds that the fees requested are reasonable.

Conclusion

Based on the foregoing, the Court intends to grant Canul’s motion for approval of representative PAGA settlement once evidence that the settlement proposal was submitted to the LWDA is provided. The Court also will sign the proposed Order and Judgment submitted by Canul.

Canul is ordered to give notice of this Order and the concurrently signed Order and Judgment.

DATED: August 22, 2018 ________________________________

Hon. Teresa A. Beaudet

Judge, Los Angeles Superior Court

[1] Aggrieved Employees are defined as “all current and former non-exempt employees who worked at least one pay period for McStarlite in California at any time during the PAGA Period.” (Haines Decl., Ex. 2, § I.2.) The PAGA Period is defined as June 19, 2016 through the date that the court grants settlement approval. (Haines Decl., Ex. 2, § I.12.)