Case Number: BC612058 Hearing Date: September 10, 2019 Dept: 26

Superior Court of California
County of Los Angeles
Department 26

LORRAINE SHELDON, an individual, appearing individually and on behalf of all others similarly situated,

Plaintiff,

v.

EAST VALLEY GLENDORA HOSPITAL, L.P. et al.

Defendants.

Case No.: BC612058

Hearing Date: September 10, 2019

[TENTATIVE] order RE:

ORDER GRANTING APPROVAL OF

PAGA SETTLEMENT

BACKGROUND AND PROCEDURAL HISTORY

Plaintiff Lorraine Sheldon (Plaintiff) sues her former employer, Defendant East Valley Glendora Hospital, LP (Defendant) as an aggrieved employee pursuant to the Private Attorneys General Act for alleged wage and hour violations pursuant to the Labor Code.

On January 26, 2016, Plaintiff provided written notice by certified mail to the Labor and Workforce Development Agency (LWDA) and Defendant of the specific provisions of the Labor Code she alleged Defendant violated, including facts and theories to support the alleged violations. (Complaint ¶ 38, Exh. 1.) On February 17, 2016, Plaintiff sent an amended version by certified mail to LWDA and Defendant. (Complaint ¶ 39, Exh 2.)

On February 29, 2016, Plaintiff filed her complaint against Defendant (the PAGA Action). Plaintiff sought to recover penalties against Defendant pursuant to the Private Attorney General Act, Labor Code, sections 2699, et seq. (PAGA).

On April 5, 2016, Plaintiff filed an amendment adding defendants Glendora Community Hospital and Prime Healthcare Services, Inc. Both parties were served by mail at Defendant’s address and at Glendora Community Hospital, 24955 Pacific Coast Highway, Suite B-102, Malibu. Neither party has appeared. The parties were ordered to show cause re: dismissal as to all defendants, including Glendora Community Hospital and Prime Healthcare Services, Inc., at the hearing on this motion.

Plaintiff and Defendant agreed to early mediation. Following an unsuccessful mediation, the parties engaged in discovery regarding Defendant’s wage statements, number of employees involved, and related information, and continued settlement negotiations under their mediator’s guidance. Pursuant to their mediator’s proposal to settle the wage statement claims, the parties were able to reach a tentative settlement of the PAGA Action, subject to a finalization of a formal settlement agreement and the approval of the Court. The parties then engaged in negotiations about the settlement terms and conditions of the settlement and memorialized the proposed Settlement in the PAGA Settlement Agreement (Settlement Agreement), a copy of which is attached to the Declaration of Raul Perez as Exhibit 1.

Now before the Court is the motion for approval of the PAGA Settlement Agreement.

DISCUSSION

Terms of the Settlement Agreement

The essential terms of the PAGA settlement are as follows:

(1) “PAGA Employees” shall refer to all non-exempt, hourly-paid employees who worked for East Valley Glendora Hospital, L.P. from February 28, 2015 to the date of approval of the settlement and received at least one wage statement. (p. 2, ¶ 8.)

(2) “Effective Date” is defined as the later of: (1) if no timely objections are filed, or are withdrawn prior to final approval, the date upon which the Court enters an order granting final approval of the Settlement Agreement in Case No. BC612058; or (2) the expiration date of the time for filing or noticing any such appeals after the Court enters an order granting final approval of the Settlement Agreement. (p. 1, ¶ 2.)

(3) PAGA Penalties Fund. Pursuant to the Settlement Agreement, approximately $260,000 will be placed in a PAGA Penalties Fund, which will be paid to aggrieved employees and the LWDA in full satisfaction of all Settled Claims (“PAGA Penalties Fund”). (p. 2, ¶ 11.)

(4) Payment Formula.

(a) Seventy-five percent of the PAGA Penalties Fund, or approximately $195,000, will be paid to the LWDA pursuant to Labor Code section 2699, subdivision (i). (p. 2, ¶ 11.)

(b) Twenty-five percent of the PAGA Penalties Fund, or approximately $65,000, will be paid to all non-exempt, hourly-paid employees who worked for East Valley Glendora Hospital, L.P. from February 28, 2015 to the date of approval of the settlement and received at least one wage statement (“Aggrieved Employees”). There are approximately 550 Aggrieved Employees. The average payment to each aggrieved employee is approximately $120. (p. 2, ¶ 11.)

(c) The funds will be distributed on a pro rata basis based on the number of pay periods each individual PAGA employee worked for Defendant for the period from February 28, 2015 to the date on which this Court issues approval. (pp. 2-3, ¶¶ 9, 11(b).)

(d) Defendant will pay $225,000 in attorney fees and costs to Plaintiff’s counsel. (p. 3, ¶ 12.)

(e) Defendant will pay Settlement Administration Costs, estimated at $5,000, to ILYM Group, Inc. (p. 6, ¶ 18.)

(5) Release by PAGA Employees. Subject to the terms of this Agreement, and in exchange for the PAGA Payments set forth herein, each PAGA Payee shall be bound by the following release: PAGA Release by Plaintiff as Proxy for the State of California, the LWDA, and as Representatives of the PAGA Employees. Upon the Effective Date, Plaintiff in her capacity as proxy for the State of California, the LWDA, and as a private attorney general acting on behalf of herself and the PAGA Employees, shall fully release and forever discharge any and all claims by her and the PAGA Employees arising from February 28, 2015 to the date of approval of the settlement for all claims under PAGA for Labor Code section 226 violations that were asserted or could reasonably have been asserted based on the facts alleged in the Action that Plaintiff and PAGA Employees received wage statements that were incomplete and/or inaccurate. This PAGA Release shall bar these released claims by or on behalf of Plaintiff and all PAGA Employees regardless of whether Plaintiff and/or a PAGA Employee negotiates his/her settlement checks sent pursuant to this Settlement. (p. 2, ¶ 13.)

(6) General Release by Plaintiff. Additionally, Plaintiff Lorraine Sheldon provides a general release and Civil Code section 1542 waiver. (pp. 3-5, ¶ 14.)

(7) Service Award to Plaintiff. A $10,000 payment to Plaintiff as consideration for her service on behalf of the State of California and Aggrieved Employees, and for a general release of all claims she may have against Defendant arising out of her employment. (pp. 3-5, ¶ 14.)

(8) Funding of the Settlement. Within thirty (30) calendar days after the Effective Date, Defendant will deposit the Settlement Consideration into the qualified settlement fund to be established by the Settlement Administrator. Within fourteen (14) calendar days of the funding of the Settlement, the Settlement Administrator will issue payments to: (a) PAGA Employees; (b) the Labor and Workforce Development Agency; (c) Plaintiff; (d) Plaintiff’s Counsel; and (e) itself. The Settlement Administrator, and not Defendant, will issue the appropriate tax forms for all payments issued under this Settlement. (p. 6, ¶ 21.)

(9) Settlement Payments to PAGA Employees. The Settlement Administrator will issue each PAGA Employee one check for his or her share of the PAGA Penalties Fund along with an explanatory letter which will be mutually approved by the parties. Prior to mailing, the Settlement Administrator will perform a search based on the National Change of Address Database for information to update and correct for any known or identifiable address changes. Any checks returned as non-deliverable on or before the check cashing deadline will be sent promptly via regular First-Class U.S. Mail to the forwarding address affixed thereto. If no forwarding address is provided, the Settlement Administrator will promptly attempt to determine the correct address using a skip-trace, or other search using the name, address or Social Security number of the PAGA Employee involved, and will then perform a single re-mailing. Checks will remain negotiable for 180 days. Those funds represented by un-cashed checks which remain outstanding 180 days after the mailing of the Settlement checks by the Settlement Administrator will be tendered to the Department of Industrial Relations Unpaid Wage Fund (See Lab. Code § 96.6). All settlement payments to PAGA Employees will be treated as miscellaneous income for which a 1099 will be issued. (pp. 6-7, ¶ 22.)

(10) Settled Claims. Upon entry of the Order and Judgment, Plaintiff and all PAGA Employees will be forever barred from pursuing against Defendant any and all claims for PAGA civil penalties for violation of Labor Code section 226 (“Settled Claims”). PAGA Employees, other than Plaintiff, will not be deemed to have released any individual wage and hour claims by virtue of this Settlement. No other PAGA claims other than those for wage statement violations under Labor Code section 226 shall be released as a result of this agreement. (p. 7, ¶ 23.)

(11) Judgment and Continued Jurisdiction. After entry of the Order and Judgment, the Court will have continuing jurisdiction solely for purposes of addressing: (i) the interpretation and enforcement of the terms of the Settlement, (ii) settlement administration matters, and (iii) such post-Judgment matters as may be appropriate under court rules or as set forth in this Settlement. (p. 8, ¶ 27.)

(12) Plaintiff Lorraine Sheldon and her counsel, Raul Perez signed the Settlement Agreement on May 4, 2019 and May 7, 2019 respectively. (p. 11.)

(13) Defendant East Valley Glendora Hospital’s authorized signature and its counsel, John D. Hayashi, signed the Settlement Agreement on May 6, 2019. (p. 11.[1])

Plaintiff’s Underlying Claims

Plaintiff Loraine Sheldon, alleges the following:

· East Valley Glendora Hospital employees (Employees) were required to sign Defendant’s written meal and rest break policy. (Complaint ¶ 16);

· Employees were not paid for all hours worked, because all hours worked were not recorded (id. at ¶ 22);

· Employees were entitled to overtime compensation and did not receive that compensation (id. at ¶ 23);

· Employees were not receiving at least minimum wages and overtime wages for work performed off-the-clock (id. at ¶ 24);

· Employees did not receive all mandated meal periods or fully compliant meal periods (id. at ¶ 25);

· Employees did not receive all mandated rest breaks or compliant rest breaks (id. at ¶ 26);

· Defendant failed to provide timely and legally compliant and accurate wage statements (id. at ¶¶ 27-28);

· Defendant failed to pay all money owed at the time of said employees separation (id. at ¶ 29);

· Defendant failed to provide employees with written notice of the paid sick leave balance available to them (id. at ¶ 30);

· Defendant failed to provide employees with written notice of the material terms of their employment (id. at ¶ 31.)

The Nature of a PAGA Claim

PAGA was enacted to aid public agencies, which lack adequate funding, in enforcement of California’s labor laws. Private persons suing under the PAGA do so as a proxy of the state. (Arias v. Superior Court (2009) 46 Cal.4th 969, 986.) Aggrieved employees suing under the PAGA are authorized to recover civil penalties, which is essentially a law enforcement function, designed to protect the public.

LEGAL STANDARD

Labor Code section 2699, subdivision (l)(2) requires courts to “review and approve any settlement of any civil action filed pursuant to this part.” Our Supreme Court explained that a PAGA claim is a form of a qui tam action. (Iskanian v. CLS Transportation Los Angeles LLC (2014) 59 Cal.4th 348, 382.) Thus, the Court looks to the standards in evaluating a qui tam settlement in evaluating this settlement. The Court must determine that the settlement is “fair, adequate, and reasonable.” (Cf. Govt. Code, § 12652.) While PAGA actions are distinct from class actions, the class action standard (fair, reasonable, and adequate settlement) is adopted here.

ANALYSIS

Assessing the fairness and adequacy of any settlement necessitates decision making based on unknowns. However, in determining whether settlements fall within the parameters of what may be considered reasonable, courts regularly rely on estimates of potential maximum values weighed against weaknesses of the claims. Other important indicia of fairness include arms’ length negotiations, experienced counsel, and an adequate investigation of the claims. However, the potential value of the claims being settled is primary to any evaluation. (See Carter v. City of Los Angeles (2014) 224 Cal.App.4th 808, 822–823.)

Here, it was estimated at the time of the Settlement there were 550 PAGA Employees, with approximately 20,000 pay periods, of which 1,205 pay periods had violative wage statements going back to February 28, 2015 and extending through the Court’s approval of the Settlement Agreement. (Mot., p. 11:4-7.) Labor Code section 266.3 governs the calculation of each aggrieved employee’s pro rata entitlement, which dictates that $250 be awarded to each aggrieved employee per pay period for the initial violation, and $1,000 be awarded to each aggrieved employee per pay period for each subsequent violation. (Id. at p. 11:8-20.) Based on Defendant’s discovery responses, there were 550 violative wage statements and 655 subsequent violative wage statements. (Id. at p. 11:10-12.) Thus, Defendant’s exposure was approximately $792,500. (Id. at p. 11:11.)

Plaintiff’s Counsel asserts that the PAGA Settlement of $260,000 is fair and reasonable given the risks inherent in continued litigation. (Mot. p. 10:28-11:2.) After calculating Defendant’s maximum exposure, Plaintiff discounted Defendant’s exposure to account for the risks of continued litigation, including (i) the strength of Defendant’s defenses on the merits, (ii) the risk of losing on any number of dispositive motions between now and trial, (iii) the risk that the Court would exercise its discretion to reduce the maximum civil penalties under Labor Code section 2699, subdivision (e), (iv) the changes of a favorable verdict being reversed on appeal, and (v) the difficulties attendant to collecting on a judgment. (Mot. p. 12:1-8.) Taken together, Plaintiff determined that $260,000 in PAGA penalties was warranted in this case. (Id. at p. 12:8-9.) This amount does not include attorney fees and costs. (Perez Decl., ¶ 5, Exh. 1 (Settlement Agreement), p. 1, ¶ 3.) Of this amount, $195,000 will be paid to the LWDA and $65,000 will remain to be divided pro rata among the aggrieved employees. (Id. at p. 2, ¶ 11.) Thus, payments to aggrieved employees will average $118.18. [$65,000 / 550 aggrieved employees = $118.18]. Given the circumstances detailed above, the Court finds that this award is fair and reasonable.

The Settlement Agreement provides $225,000 in attorneys’ fees to Plaintiff’s counsel and $5,000 to be paid to a third-party settlement administrator appointed pursuant to the settlement agreement. (Perez Decl., ¶ 5, Exh. 1 (Settlement Agreement), pp. 3, 6 ¶¶ 12, 18.) As set forth below, the Court finds the determination of attorney’s fees and costs to be reasonable. The parties determine that approximately $5,000 of the gross settlement for administration and reporting fess, which is a good faith estimate. The parties should clarify at the hearing why a settlement administrator has not yet been appointed.

Notice to Class of Final Approval Hearing

PAGA has no notice requirements for unnamed class members, nor may such employees opt out of a PAGA actions. (See Hernandez v. DMSI Staffing, LLC. (N.D. Cal. 2015) 79 F.Supp.3d 1054, 1063.)

A copy of the proposed Notice of Settlement Payment, which will accompany the payments to Aggrieved Employees, is attached to the Declaration of Raul Perez in Support of Plaintiff’s Motion for Court Approval of the Parties’ PAGA Settlement as Exhibit 1.

Request for Attorneys’ Fees and Costs

An aggrieved employee who prevails in a PAGA action may recover reasonable attorney’s fees and costs. (Labor Code, § 2699, subd. (g)(1).) It is undisputed that by obtaining PAGA penalties for the LWDA and aggrieved employees, Plaintiff has prevailed. (See Graciano v. Robinson Ford Sales (2006) 144 Cal.App.4th 140, 153.) Pursuant to the Settlement Agreement, Defendant will pay Plaintiff’s counsel $225,000 in fees and costs. (Perez Decl., ¶ 5, Exh. 1 (Settlement Agreement), p. 3 ¶ 12.) Plaintiff’s counsel states that a total of $233,823.00 have been billed by various attorneys working on this case. (Id. at ¶ 10.) Additionally, Plaintiff’s counsel declares that its firm has incurred $16,145.01 in costs. (Id. at ¶ 13.)

Plaintiff’s counsel provides numerous cases awarding comparable rates in support of their requested fee. (Id. at ¶¶ 11-12.) Plaintiff’s counsel has also provided a chart breaking down the hourly rate and hours billed by each of the nine attorneys that worked on this case (excluding approximately $10,000 in attorneys’ fees that the firm voluntarily wrote off). (Id. at ¶ 10.) This demonstrates that the Plaintiff is committed to a good faith settlement. Additionally, the attorneys’ hourly rates range from $725 per hour to $295 per hour based on seniority. (Ibid.) The Court finds this request is reasonable.

The Settlement Agreement does not explicitly earmark the amount to be awarded to Plaintiff’s counsel for costs; however, Plaintiff’s counsel provides a detailed breakdown of the costs incurred to date including (1) $140.75 for copying, printing, etc.; (2) $1,884.96 for court fees, filing fees, and service of process; (3) $90.80 for deliveries; (4) $550.00 for consulting; (5) $11,000 in mediation fees, (6) $76.42 for postage and mailing; (7) $39 for research services (including PACER and Lexis); and (8) $2,362.88 in travel-related costs and expenses. (Perez Decl., ¶ 13.)

Plaintiff’s counsel argues that these reasonable costs were incurred during the case’s pendency. Attorney Perez declares that his firm, Capstone, has incurred these costs during the pendency of the litigation. (Ibid.) Defendant does not oppose. Furthermore, the attorneys’ fees were discounted by $10,000 in the discretion of firm. (Id. at ¶ 10.) Because Plaintiff’s counsel exhibits a good faith effort to accurately calculate its firm’s expenses, the Court determines that these costs are reasonable. Thus, the Court approves of the Settlement Agreement’s award of $225,000 in attorneys’ fees and costs to by paid by Defendant to Plaintiff’s counsel.

Enhancement Awards

The Settlement Agreement provides that a total of $10,000 is to be paid to Lorraine Sheldon. (Perez Decl., ¶ 5, Exh. 1 (Settlement Agreement), pp. 3-5 ¶¶ 14.)

The Settlement Agreement indicates that these payments are to serve as compensation for serving as the representative who initiated the claims on behalf of the aggrieved employees and for entering into a general release of all their claims. (Mot. p. 8:1-2; Perez Decl., ¶ 5, Exh. 1 (Settlement Agreement), pp. 3-5 ¶¶ 14.)

Plaintiff provides a written declaration in support of her requested award as “reasonable compensation for the general release that [she is] required to provide to Defendant as a condition of settlement” because “[t]his general release requires [her] to waive all claims that [she] may have arising out of [her] employment and is considerably broader than the Settled Claims.” (Sheldon Decl., ¶¶ 3-11, quoting ¶ 11.) This declaration sufficiently details the reason for Plaintiff’s enhancement award. Thus, Plaintiff’s request is granted.

Settlement Administration

The parties will appoint a settlement administrator to perform settlement administration. (Perez Decl., ¶ 5, Exh. 1 (Settlement Agreement), p. 6, ¶ 18.) Total payment to the Settlement Administrator shall not exceed $5,000 (mailing inclusive.) (Id. at p. 1, ¶ 6, p. 6, ¶ 18.)

The “Settlement Administrator” means a third party selected by the parties which the parties agree will be responsible for establishing a qualified settlement fund and issuing payments and appropriate tax forms to PAGA Employees, the LWDA, Plaintiff, and Plaintiff’s counsel. The Settlement Agreement does not provide when, relative to the Effective Date, the parties will retain the Settlement Administrator. However, the Settlement Agreement provides that within thirty calendar days of the Effective Date, Defendant will deposit the Settlement Consideration ($500,000) into the qualified settlement fund. Within fourteen calendar days of the funding of the qualified settlement fund, the Settlement Administrator will issue payments to: (a) PAGA Employees, (b) the Labor and Workforce Development Agency, (c) Plaintiff, (d) Plaintiff’s counsel, and (e) itself. (Id. at p. 6, ¶ 21.) Additionally, the Settlement Administrator will issue one check to each PAGA Employee for his or her share of the PAGA Penalties Fund along with an explanatory letter which will be mutually approved by the parties. The Settlement Administrator will perform a search based on the National Change of Address (“NCOA”) of the PAGA Employee list prior to the initial mailing. Within seven calendar days of the Effective Date, Defendant will provide the Settlement Administrator a complete list of all PAGA Employees. (Id. at p. 6, ¶ 20.)

Plaintiffs’ Counsel has neither identified the Settlement Administrator, provided the “Notice of Settlement Agreement” letter, nor provided any justification for the high estimated cost of administration. The parties are requested to present proof at the hearing of why payment of $5,000 to the third-party settlement administrator is justified in this case.

The Court orders the parties to appoint said Settlement Administrator within seven days of this order and submit said Settlement Administrator’s name and qualifications to this Court for approval.

CONCLUSION AND ORDER

For the reasons set for above, the Court now conditionally grants Plaintiff’s motion for court approval of the parties’ PAGA settlement. Approval of the proposed settlement administration fee is contingent upon a sufficient offer of proof by Plaintiff at the hearing why payment of $5,000 to the third-party settlement administrator is justified in this case.

The parties are ordered to appoint a Settlement Administrator within 7 days of this order, subject to this Court’s approval.

Plaintiff is ordered to give notice of this ruling and file proof of service of such within 10 days.

DATED: September 10, 2019 ___________________________

Elaine Lu

Judge of the Superior Court

[1] There are two pages “11,” this is the second of the two.