2016-00198615-CU-OE

Whitney Conner vs. Frisky Rhythm, LLC

Nature of Proceeding: Motion for an Order Approving Settlement

Filed By: Gaines, Kenneth S.

Plaintiff Whitney Connor’s unopposed motion for order approving settlement of claims brought pursuant to the Private Attorney General Act of 2004 (“PAGA”), awarding attorneys’ fees, costs, service payment, and reimbursement of settlement administration expenses, and dismissing action is granted.

Plaintiff seeks an order approving settlement of claims brought in this action pursuant to PAGA on behalf of himself and all California employees employed by Defendants Frisky Rhythm, LLC and Dive Bar, LLC at the Sacramento locations between August 2, 2015 and September 20, 2016. The PAGA claims were based on alleged violations of Labor Code §§ 204 and 210 (prompt and correct payment of wages). The remaining claims in the complaint are being dismissed without prejudice.

Settlement of PAGA claims requires Court approval. Labor Code § 2699(l)(2) provides that “[t]he superior court shall review and approve any settlement of any civil action pursuant to this part.”

Labor Code § 2699(l)(2) does not provide any criteria to be employed by the court in deciding whether to approve the settlement. The Court agrees with Plaintiff that it should be guided by certain criteria governing class actions given that federal courts in California have applied Rule 23 criteria in evaluating PAGA claims. While Plaintiff relies on cases applying Rule 23 criteria, California cases discussing class actions reflect the same principles. However, unlike a class action, unnamed employees need not be given notice of a PAGA claim given it is fundamentally a law enforcement action to recover penalties. (E.g. Ochoa-Hernandez v. CJADERS Foods, Inc. (N.D.Cal. April 2, 2010) U.S.Dist.LEXIS 32774, *12.) This negates the need to do the two-step

preliminary and final approval which is required for a class action settlement. In addition, a release in a PAGA is limited solely to the penalties alleged in the complaint and any unnamed aggrieved employee is not bound by any judgment as to any remedy other than the PAGA civil penalties. (Arias v. Superior Court (2009) 46 Cal.4th 969, 987.) With these principles in mind, the Court finds that the PAGA settlement is entitled to be approved.

In the class action context, the trial court has broad powers to determine whether a proposed settlement is fair. (Rebney v. Wells Fargo Bank (1990) 220 Cal. App. 3rd 1117, 1138.) The focus on a PAGA settlement is the total settlement amount not the amount that an aggrieved employee receives given that the remedy is a civil penalty, not individual or class damages. (Mendez v. Tween Brands, Inc. (E.D.Cal. June 30, 2010) 2010 U.S. Dist. LEXIS 66454, *11.)

The law favors settlement, particularly in class actions and other complex cases where substantial resources can be conserved by avoiding the time, cost, and rigors of formal litigation. (See Newberg on Class Actions 4th (4th ed. 2002) § 11.41 (and cases cited therein); Class Plaintiffs v. City of Seattle (9th Cir. 1992) 955 F.2d 1268, 1276; Van Bronkhorst v. Safeco Corp. (9th Cir. 1976) 529 F.2d 943, 950; see also Potter v. Pacific Coast Lumber Co. (1951) 37 Cal.2d 592, 602.) The trial court has broad powers to determine whether a proposed settlement in a class action is fair. (Rebney v. Wells Fargo Bank (1990) 220 Cal. App. 3d 1117, 1138.)

The Court here is guided by the same principle applicable in class actions that, the Court must “satisfy itself that the class settlement is within the ‘ballpark’ of reasonableness.” (Kullar v. Foot Locker Retail, Inc., (2008) 168 Cal.App.4th 116, 133.) In making its fairness determination, the Court should consider the relevant factors, such as the strength of the Plaintiffs’ case, the risk, expenses, complexity and likely duration of further litigation, the risk further litigation, the amount offered in settlement, the extent of discovery completed and the stage of the proceedings, and the experience and views of counsel. (Dunk v. Ford Motor Co. (1996) 48 Cal. App. 4th 1794,1801.)

As set forth above, the PAGA claims that are the subject of the instant settlement were premised on alleged violations of Labor Code §§ 204 and 210 (prompt and correct payment of wages. Approximately 75 employees suffered the alleged Labor Code violations during the relevant period. Defendants’ maximum potential exposure in the action of approximately $320,000 was computed by multiplying 3,200 aggregate pay periods by $100 each. Defendants maintained numerous defenses, including that they did not violate any provision of the Labor Code in addition to asserting that even if penalties were awarded, the Court had the discretion to reduce the amount pursuant to Labor Code § 2699(e)(2). The parties reached a settlement for $100,000. The settlement provides that $45,000 for Plaintiff’s fees and costs, $6,000 for a service payment to Plaintiff, and up to $2,500 for costs of administration will be deducted from the settlement leaving $46,500. 75% of the $46,500 ($34,875) will be distributed to the Labor and Workforce Development Agency and 25% ($11,625) will be evenly distributed to the aggrieved employees.

In the case of a class action, before finally approving a class action settlement, the Court must find that the settlement is “fair, adequate, and reasonable.” (Wershba v. Apple Computer (2001) 91 Cal.App.4th 224, 244, 245.) “[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 Company (1996) 48 Cal.App.4th 1794, 1802.) The Court considers such factors as “the strength of plaintiffs’ case, the risk, expense, complexity and likely duration of further litigation, the risk of maintaining class action status through trial, the amount offered in settlement, the extent of discovery completed and the stage of the proceedings, the experience and views of counsel, the presence of a governmental participant, and the reaction of class members to the proposed settlement.” (Id. at 1801.)

Here, the Court finds that the settlement is entitled to approval. The settlement was the product of arms-length negotiations and was negotiated by counsel with significant experience in wage and hour litigation and occurred after counsel conducted significant investigation to evaluate the strength and potential value of the PAGA claims and risks of litigating through trial. (Gaines Decl. ¶¶2-7, 18-23, 33-44.) In addition, the settlement achieves a significant benefit given it results in a recovery of 31.25% of the maximum possibly liability Defendant faced for the PAGA penalties. As seen by the cases cited in the moving papers, federal courts in California have approved PAGA settlements of far less value and involving more the 100 aggrieved employees here. (Mot. 12:17-13:8.) Further, the scope of the release is narrowly tailored and is only limited to the civil penalties asserted in the action under PAGA, in conformity with Arias, supra, 46 Cal.4th at 987. In addition, Plaintiff submitted the proposed settlement to the Labor and Workforce Development Agency at the same time it was presented to the Court as required by Labor Code § 2699(l)(2) and the LWDA has not issued any adverse response. (Gaines Decl. ¶ 48.)

As a result, the Court finds that the instant settlement is fair, adequate and reasonable and it is approved.

In addition, the Court approves Plaintiff’s counsel’s request for fees and costs in the amount of $45,000 ($40,000 in fees and $5,000 in costs). The fees represent approximately 40% of the settlement amount. As seen from the moving papers, courts have approved attorneys’ fees awards in the 30-40% range in wage and hour representative actions resulting in a common fund under $10 million. (Martin v. AmeriPride Services, Inc. (S.D.Cal. June 9, 2011) 2011 US Dist. LEXIS 61796, *23.) Here, the request is within the standard range and is particularly appropriate here given the contingency Plaintiff’s counsel incurred for the benefit of the State after the State elected not to pursue the matter after receiving the PAGA notice and the significant benefits obtained as a result. In addition the $5,000 in costs is reasonable.

Further, the $6,000 service payment to Plaintiff is appropriate. A named plaintiff’s “willingness to act as a private attorney general” can justify an award of an incentive payment. (Rodriguez v. West Publishing Corp. (9th Cir. 2009) 563 F.3d 948, 959.)

In addition, the $2,500 in administration costs for ILYM Group, Inc. to administer the settlement is reasonable.

As a result, the settlement, Plaintiff’s counsel’s fees and costs, the service payment to Plaintiff and the administration costs are approved.

The Court will sign the proposed order.