Superior Court, State of California
DATE: AUGUST 10, 2023 TIME: 1:30 P.M.
PREVAILING PARTY SHALL PREPARE THE ORDER
UNLESS OTHERWISE STATED (SEE RULE OF COURT 3.1312)
|LINE # |CASE # |CASE TITLE |RULING |
|LINE 1 |22CV400335 |Walker, et al. v. DJO, LLC (Class Action) (LEAD |See tentative ruling. The Court will prepare|
| | |CASE; consolidated with 22CV401621) |the final order. |
|LINE 2 |21CV376394 |Hicks v. California Water Service |See tentative ruling (which is the same one |
| | | |sent early to the parties). The Court will |
| | | |prepare the final order. |
|LINE 3 |23CV409937 |Skinner v. Thekey of California, LLC, et al. |See tentative ruling. The Court will prepare|
| | |(PAGA) |the final order. |
|LINE 4 |22CV396821 |Zhou v. Cisco Systems, Inc. (Class Action) |See tentative ruling. The Court will prepare|
| | | |the final order. |
|LINE 5 |21CV389927 |Johnson v. FS Palo Alto Employment, Inc. (PAGA) |See tentative ruling. The Court will prepare|
| | | |the final order. |
|LINE 6 |20CV372622 |Temujin Labs Inc. v. Abittan, et al. |See tentative ruling. The Court will prepare|
| | | |the final order. |
|LINE 7 |21CV375422 |Temujin Labs Inc. v. Fu |See line 6. |
|LINE 8 |20CV372622 |Temujin Labs Inc. v. Abittan, et al. |See line 6. |
|LINE 9 |23CV415833 |Trace3 v. Sycomp et al. |The Court invites (relatively brief) oral |
| | | |argument on Sycomp’s |
| | | |reconsideration/clarification motion. |
|LINE 10 |23CV415833 |Trace3 v. Sycomp et al. |The Court invites (relatively brief) oral |
| | | |argument on Trace3’s motion to continue the |
| | | |briefing schedule on the preliminary |
| | | |injunction motion. |
|LINE 11 | | | |
|LINE 12 | | | |
|LINE 13 | | | |
Calendar Line 1
Case Name: Walker, et al. v. DJO, LLC
Case No.: 22CV400335 (consolidated with Case No. 22CV401621)
INTRODUCTION
This is a putative class and Private Attorneys General Act (“PAGA”) action. Plaintiffs Tamika Walker (“Plaintiff Walker”) and Shannon Peete (“Plaintiff Peete”) allege that Defendant DJO, LLC (“Defendant”), which provides orthopedic devices, failed to provide employees with compliant meal and rest breaks, failed to pay minimum and overtime wages, issued noncompliant wage statements, and committed other wage and hour violations.
Now before the Court is Plaintiffs’ motion for preliminary approval of a settlement, which is unopposed. As discussed below, the Court will grant preliminary approval but requests that class counsel make certain minor modifications to the class notice.
BACKGROUND
Plaintiffs Walker and Peete began employment with Defendant in September 2019 and ended their employment in April 2022. (First Amended Class Action Complaint (“FAC”), ¶ 3.) Both Plaintiffs were employed by Defendant as hourly, non-exempt employees. (Ibid.)
According to Plaintiffs, they were sometimes required to work while clocked out for their meal breaks and they were not paid to participate in required drug and other testing or COVID-19 screening. (FAC, ¶ 8.) And, Defendant utilized an unlawful rounding policy resulting in employees not being paid for all hours worked. (FAC, ¶ 8.) Further, while employees routinely earned non-discretionary incentive wages, overtime pay and meal and rest period premium pay was paid at their base pay rate rather than the regular rate of pay. (FAC, ¶ 10.) Defendant also required employees to use their personal cellular phones for work purposes without compensation. (FAC, ¶ 23.)
Based on these allegations, Plaintiffs assert, in the operative First Amended Complaint, putative class claims for: (1) violation of Business and Professions Code section 17200, et seq.; (2) failure to pay minimum wages, in violation of Labor Code sections 1194, 1197, and 1197.1; (3) failure to pay overtime wages, in violation of Labor Code section 510, et seq.; (4) failure to provide meal periods, in violation of Labor Code sections 226.7 and 512 by and the relevant Industrial Wage Commission order; (5) failure to provide rest breaks, in violation of Labor Code sections 226.7 and 512 by and the relevant wage order; (6) violation of Labor Code section 226 by failing to provide accurate itemized wage statements; (7) failure to reimburse employees for required expenses under Labor Code section 2802; (8) failure to provide wage when due under Labor Code sections 201 through 203; (9) failure to pay sick wages in violation of Labor Code 201 through 204, 233, and 246, and (10) a representative claim for PAGA penalties (Lab. Code, § 2698, et seq.).[1]
Now, Plaintiffs move for an order preliminarily approving the settlement of the class and PAGA claims, provisionally certifying the settlement class, approving the form and method for providing notice to the class, appointing class counsel and the class administrator, and scheduling a final fairness hearing.
DISCUSSION
I. Legal Standards for Settlement Approval
A. Class Action
Generally, “questions whether a (class action) settlement was fair and reasonable, whether notice to the class was adequate, whether certification of the class was proper, and whether the attorney fee award was proper are matters addressed to the trial court’s broad discretion.” (Wershba v. Apple Computer, Inc. (2001) 91 Cal.App.4th 224, 234–235 (Wershba), disapproved of on other grounds by Hernandez v. Restoration Hardware, Inc. (2018) 4 Cal.5th 260.)
In determining whether a class settlement is fair, adequate and reasonable, the trial court should consider relevant factors, such 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 the class members to the proposed settlement. (Wershba, supra, 91 Cal.App.4th at pp. 244-245, internal citations and quotations omitted.)
In general, the most important factor is the strength of the plaintiffs’ case on the merits, balanced against the amount offered in settlement. (See Kullar v. Foot Locker Retail, Inc. (2008) 168 Cal.App.4th 116, 130 (Kullar).) But the trial court is free to engage in a balancing and weighing of relevant factors, depending on the circumstances of each case. (Wershba, supra, 91 Cal.App.4th at p. 245.) The trial court must examine the “proposed settlement agreement to the extent necessary to reach a reasoned judgment that the agreement is not the product of fraud or overreaching by, or collusion between, the negotiating parties, and that the settlement, taken as a whole, is fair, reasonable and adequate to all concerned.” (Ibid., citation and internal quotation marks omitted.) The trial court also must independently confirm that “the consideration being received for the release of the class members’ claims is reasonable in light of the strengths and weaknesses of the claims and the risks of the particular litigation.” (Kullar, supra, 168 Cal.App.4th at p. 129.) Of course, before performing its analysis the trial court must be “provided with basic information about the nature and magnitude of the claims in question and the basis for concluding that the consideration being paid for the release of those claims represents a reasonable compromise.” (Id. at pp. 130, 133.)
B. PAGA
Labor Code section 2699, subdivision (l)(2) provides that “(t)he superior court shall review and approve any settlement of any civil action filed pursuant to” PAGA. The court’s review “ensur(es) that any negotiated resolution is fair to those affected.” (Williams v. Superior Court (2017) 3 Cal.5th 531, 549.) Seventy-five percent of any penalties recovered under PAGA go to the Labor and Workforce Development Agency (“LWDA”), leaving the remaining twenty-five percent for the aggrieved employees. (Iskanian v. CLS Transportation Los Angeles, LLC (2014) 59 Cal.4th 348, 380, overruled on other grounds by Viking River Cruises, Inc. v. Moriana (2022) ___U.S.___, 2022 U.S. LEXIS 2940.)
Similar to its review of class action settlements, the Court must “determine independently whether a PAGA settlement is fair and reasonable,” to protect “the interests of the public and the LWDA in the enforcement of state labor laws.” (Moniz v. Adecco USA, Inc. (2021) 72 Cal.App.5th 56, 76-77.) It must make this assessment “in view of PAGA’s purposes to remediate present labor law violations, deter future ones, and to maximize enforcement of state labor laws.” (Id. at p. 77; see also Haralson v. U.S. Aviation Servs. Corp. (N.D. Cal. 2019) 383 F. Supp. 3d 959, 971 (“when a PAGA claim is settled, the relief provided for under the PAGA (should) be genuine and meaningful, consistent with the underlying purpose of the statute to benefit the public ….”), quoting LWDA guidance discussed in O’Connor v. Uber Technologies, Inc. (N.D. Cal. 2016) 201 F.Supp.3d 1110 (O’Connor).)
The settlement must be reasonable in light of the potential verdict value. (See O’Connor, supra, 201 F.Supp.3d at p. 1135 (rejecting settlement of less than one percent of the potential verdict).) But a permissible settlement may be substantially discounted, given that courts often exercise their discretion to award PAGA penalties below the statutory maximum even where a claim succeeds at trial. (See Viceral v. Mistras Group, Inc. (N.D. Cal., Oct. 11, 2016, No. 15-CV-02198-EMC) 2016 WL 5907869, at *8-9.)
II. Settlement Process
According to Plaintiffs’ counsel, the parties have engaged in significant informal discovery prior to mediation. Defendant produced, inter alia, payroll records and information regarding the composition of the class. Class counsel used that data to calculate Defendant’s liability exposure with the assistance of damages expert firm Berger Consulting.
The parties attended an all-day mediation session with Mark Rudy, Esq., an experienced wage and hour class action mediator. After negotiations with his assistance, they were able to reach the agreement now before the Court.
III. Settlement Provisions
The non-reversionary gross settlement amount is $1,500,000. Attorney fees of up to $500,000 (one-third of the gross settlement), litigation costs of up to $21,500, and up to $15,000 in administration costs will be paid from the gross settlement. One hundred fifty thousand dollars of the gross settlement amount will be allocated to PAGA penalties, 75 percent of which ($112,500) will be paid to the LWDA, leaving 25 percent ($37,500) for the aggrieved employees. The named plaintiffs will seek incentive awards of $10,000 each for a total of $20,000.
The net settlement will be allocated to the approximately 458 class members proportionally based on their pay periods worked during the class of August 2, 2018 to July 11, 2023. The PAGA payment will be allocated to aggrieved employees on a pro rata basis based on their number of pay periods worked during the PAGA period of August 2, 2022 to the sooner of the date the court grants preliminary approval or July 11, 2023. Class counsel calculates that the average payment will be around $1,732 to each of the 458 class members. Class members will not be required to submit a claim to receive their payments but instead may opt out if they wish. For tax purposes, settlement payments will be allocated 20 percent to wages and 80 percent to penalties and interest. The employer’s share of payroll taxes will be paid in addition to the gross settlement. Funds associated with checks uncashed after 180 days will be paid to the California Controller’s Unclaimed Property Fund in the name of the class member, which class counsel contends will leave no unpaid residue subject to the requirements of Code of Civil Procedure Section 384, subdivision (b).
In exchange for the settlement, class members who do not opt out will release “all class claims pled, or that could have been pled, in the Operative Complaint and PAGA Notice, based on the factual allegations contained therein which occurred during the Class Period.” The release is appropriately tailored to the factual allegations at issue. (See Amaro v. Anaheim Arena Management, LLC (2021) 69 Cal.App.5th 521, 537.) And, the PAGA release is appropriately limited to “all PAGA claims pled, or that could have been pled, in the Operative Complaint and PAGA Notice, based on the factual allegations contained therein which occurred during the PAGA Period as to the Aggrieved Employees(,)” not including the underlying wage and hour claims. Consistent with the statute, aggrieved employees will not be able to opt out of the PAGA portion of the settlement.
IV. Fairness of Settlement
Defendant asserted various defenses, denying all liability for each claim and articulating that it fully complied with all employment laws and that all time was accurately recorded. Class counsel explains that, at mediation, Plaintiffs realized that their claims for statutory penalties pursuant to Labor Code Sections 203 and 226 were subject to additional, separate defenses, including the defense that Defendant disputed in good faith whether their premium wages for meal or rest period violations or other wages were owed.
Based on the records provided by Defendant, Plaintiffs’ expert calculated damages for the failure to pay overtime claim at $79,744. The maximum exposure for the unpaid meal premiums at $83,359. Estimating one missed rest period per week, potential damages for the rest period claim were estimated to be $794,390. Damages for failure to provide expense reimbursement were calculated to be $46,250. Class counsel calculated Defendant’s total maximum exposure for class damages at $1,003,743, plus waiting time penalties of $434,270 and wage statement penalties at $496,450. Plaintiffs calculated potential PAGA penalties to be between $280,015 and $560,300 depending on the amount of the violation per pay period.
In light of the large portion of the case’s value attributable to highly uncertain penalties and the fact that the gross settlement amount exceeds class damages, the settlement achieves a good result for the class. The PAGA settlement amount of $150,000 is significant, comprising 10 percent of the total settlement amount.
For purposes of preliminary approval, the Court finds that the settlement is fair and reasonable to the class, and the PAGA allocation is genuine, meaningful, and reasonable in light of the statute’s purposes. Of course, the Court retains an independent right and responsibility to review the requested attorney fees and award only so much as it determines to be reasonable. (See Garabedian v. Los Angeles Cellular Telephone Co. (2004) 118 Cal.App.4th 123, 127–128.) Counsel has agreed to submit lodestar information prior to the final approval hearing in this matter so the Court can compare the lodestar information with the requested fees. (See Laffitte v. Robert Half Intern. Inc. (2016) 1 Cal.5th 480, 504 (trial courts have discretion to double-check the reasonableness of a percentage fee through a lodestar calculation).)
V. Proposed Settlement Class
Plaintiff requests that the following settlement class be provisionally certified: “All individuals who currently or previously have worked for Defendant in California, including both Defendant’s employees and temporary workers employed by third-party staffing agencies and assigned to work for Defendant, in non-exempt positions at any time during the Class Period” of August 2, 2018 to July 11, 2023.
A. Legal Standard for Certifying a Class for Settlement Purposes
Rule 3.769(d) of the California Rules of Court states that “(t)he court may make an order approving or denying certification of a provisional settlement class after (a) preliminary settlement hearing.” Code of Civil Procedure section 382 authorizes certification of a class “when the question is one of a common or general interest, of many persons, or when the parties are numerous, and it is impracticable to bring them all before the court ….”
Code of Civil Procedure section 382 requires the plaintiff to demonstrate by a preponderance of the evidence: (1) an ascertainable class and (2) a well-defined community of interest among the class members. (Sav-On Drug Stores, Inc. v. Superior Court (2004) 34 Cal.4th 319, 326, 332 (Sav-On Drug Stores).) “Other relevant considerations include the probability that each class member will come forward ultimately to prove his or her separate claim to a portion of the total recovery and whether the class approach would actually serve to deter and redress alleged wrongdoing.” (Linder v. Thrifty Oil Co. (2000) 23 Cal.4th 429, 435.) The plaintiff has the burden of establishing that class treatment will yield “substantial benefits” to both “the litigants and to the court.” (Blue Chip Stamps v. Superior Court (1976) 18 Cal.3d 381, 385.)
In the settlement context, “the court’s evaluation of the certification issues is somewhat different from its consideration of certification issues when the class action has not yet settled.” (Luckey v. Superior Court (2014) 228 Cal.App.4th 81, 93.) As no trial is anticipated in the settlement-only context, the case management issues inherent in the ascertainable class determination need not be confronted, and the court’s review is more lenient in this respect. (Id. at pp. 93–94.) But considerations designed to protect absentees by blocking unwarranted or overbroad class definitions require heightened scrutiny in the settlement-only class context, since the court will lack the usual opportunity to adjust the class as proceedings unfold. (Id. at p. 94.)
B. Ascertainable Class
A class is ascertainable “when it is defined in terms of objective characteristics and common transactional facts that make the ultimate identification of class members possible when that identification becomes necessary.” (Noel v. Thrifty Payless, Inc. (2019) 7 Cal.5th 955, 980 (Noel).) A class definition satisfying these requirements “puts members of the class on notice that their rights may be adjudicated in the proceeding, so they must decide whether to intervene, opt out, or do nothing and live with the consequences. (Citation.) This kind of class definition also advances due process by supplying a concrete basis for determining who will and will not be bound by (or benefit from) any judgment.” (Ibid.)
“As a rule, a representative plaintiff in a class action need not introduce evidence establishing how notice of the action will be communicated to individual class members in order to show an ascertainable class.” (Noel, supra, 7 Cal.5th at p. 984.) Still, it has long been held that “(c)lass members are ‘ascertainable’ where they may be readily identified … by reference to official records.” (Rose v. City of Hayward (1981) 126 Cal. App. 3d 926, 932, disapproved of on another ground by Noel, supra, 7 Cal.5th 955; see also Cohen v. DIRECTV, Inc. (2009) 178 Cal.App.4th 966, 975-976 (“The defined class of all HD Package subscribers is precise, with objective characteristics and transactional parameters, and can be determined by DIRECTV’s own account records. No more is needed.”).)
Here, the 458 class members are readily identifiable based on Defendant’s employment and payroll records, and the settlement class is defined based on objective characteristics. The Court finds that the settlement class is numerous, ascertainable, and appropriately defined.
C. Community of Interest
The “community-of-interest” requirement encompasses three factors: (1) predominant questions of law or fact, (2) class representatives with claims or defenses typical of the class, and (3) class representatives who can adequately represent the class. (Sav-On Drug Stores, supra, 34 Cal.4th at pp. 326, 332.)
For the first community of interest factor, “(i)n order to determine whether common questions of fact predominate the trial court must examine the issues framed by the pleadings and the law applicable to the causes of action alleged.” (Hicks v. Kaufman & Broad Home Corp. (2001) 89 Cal.App.4th 908, 916 (Hicks).) The court must also examine evidence of any conflict of interest among the proposed class members. (See J.P. Morgan & Co., Inc. v. Superior Court (2003) 113 Cal.App.4th 195, 215.) The ultimate question is whether the issues which may be jointly tried, when compared with those requiring separate adjudication, are so numerous or substantial that the maintenance of a class action would be good for the judicial process and to the litigants. (Lockheed Martin Corp. v. Superior Court (2003) 29 Cal.4th 1096, 1104-1105 (Lockheed Martin).) “As a general rule if the defendant’s liability can be determined by facts common to all members of the class, a class will be certified even if the members must individually prove their damages.” (Hicks, supra, 89 Cal.App.4th at p. 916.)
Here, it appears that common legal and factual issues predominate. Plaintiff’s claims arise from Defendant’s wage and hour practices, which would apply to the other class members, who are similarly-situated.
As to the second factor,
The typicality requirement is meant to ensure that the class representative is able to adequately represent the class and focus on common issues. It is only when a defense unique to the class representative will be a major focus of the litigation, or when the class representative’s interests are antagonistic to or in conflict with the objectives of those she purports to represent that denial of class certification is appropriate. But even then, the court should determine if it would be feasible to divide the class into subclasses to eliminate the conflict and allow the class action to be maintained.
(Medrazo v. Honda of North Hollywood (2008) 166 Cal. App. 4th 89, 99, internal citations, brackets, and quotation marks omitted.)
Like other members of the class, Plaintiffs were employed by Defendant as non-exempt employees and they allege that they suffered the violations at issue. The anticipated defenses are not unique to Plaintiff as they are based on Defendant’s compliance with applicable labor laws and its own policies and procedures and whether it properly calculated wages. There is no indication before the Court that Plaintiffs’ interests are otherwise in conflict with those of the class. The Court finds that Plaintiffs have sufficiently demonstrated typicality.
Finally, adequacy of representation “depends on whether the plaintiff’s attorney is qualified to conduct the proposed litigation and the plaintiff’s interests are not antagonistic to the interests of the class.” (McGhee v. Bank of America (1976) 60 Cal.App.3d 442, 450.) The class representative does not necessarily have to incur all of the damages suffered by each different class member in order to provide adequate representation to the class. (Wershba, supra, 91 Cal.App.4th at p. 238.) “Differences in individual class members’ proof of damages (are) not fatal to class certification. Only a conflict that goes to the very subject matter of the litigation will defeat a party’s claim of representative status.” (Ibid., internal citations and quotation marks omitted.)
Here, Plaintiffs would appear to have the same interest in maintaining this action as any other class member would have. Plaintiffs are represented by experienced counsel who are qualified to represent the class. The Court finds that Plaintiffs and their counsel are adequate to represent the class.
D. Substantial Benefits of Class Certification
“(A) class action should not be certified unless substantial benefits accrue both to litigants and the courts. . . .” (Basurco v. 21st Century Ins. (2003) 108 Cal.App.4th 110, 120, internal quotation marks omitted.) The question is whether a class action would be superior to individual lawsuits. (Ibid.) “Thus, even if questions of law or fact predominate, the lack of superiority provides an alternative ground to deny class certification.” (Ibid.) Generally, “a class action is proper where it provides small claimants with a method of obtaining redress and when numerous parties suffer injury of insufficient size to warrant individual action.” (Id. at pp. 120–121, internal quotation marks omitted.)
Here, the class is large, comprised of an estimated 458 class members. It would surely be inefficient for the Court to hear and decide the same issues separately and repeatedly for each class member. Further, it would be cost prohibitive for each class member to file suit individually, as each member would have the potential for little to no monetary recovery. It is clear that a class action provides substantial benefits to both the litigants and the Court in this case.
VI. Notice
The content of a class notice is subject to court approval. (Cal. Rules of Court, rule 3.769(f).) “The notice must contain an explanation of the proposed settlement and procedures for class members to follow in filing written objections to it and in arranging to appear at the settlement hearing and state any objections to the proposed settlement.” (Ibid.) In determining the manner of the notice, the court must consider: “(1) The interests of the class; (2) The type of relief requested; (3) The stake of the individual class members; (4) The cost of notifying class members; (5) The resources of the parties; (6) The possible prejudice to class members who do not receive notice; and (7) The res judicata effect on class members.” (Cal. Rules of Court, rule 3.766(e).)
Here, the notice describes the lawsuit, explains the settlement, and instructs class members that they may opt out of the settlement (except the PAGA component) or object. The gross settlement amount and estimated deductions are provided. Class members are informed of their qualifying pay periods as reflected in Defendant’s records and are instructed how to dispute this information. They are given 60 days to request exclusion from the class or submit a written objection to the settlement.[2] Class members are instructed that they may appear at the final fairness hearing to make an oral objection without submitting a written objection. Notice will be provided in Spanish translation.
The form of notice is generally adequate, but must be modified to instruct class members that they may opt out of or object to the settlement simply by providing their name, without the need to provide their phone number or other personal information.
With regard to appearances at the final fairness hearing, the notice shall be further modified to instruct class members as follows:
The judge overseeing this case encourages remote appearances. (As of August 15, 2022, the Court’s remote platform is Microsoft Teams.) Class members who wish to appear remotely should contact class counsel at least three days before the hearing if possible. Instructions for appearing remotely are provided at
and should be reviewed in advance. Class members may appear remotely using the Microsoft Teams link for Department 1 (Afternoon Session) or by calling the toll free conference call number for Department 1. Any class member who wishes to appear in person should check in at Court Services (1st floor, Downtown Superior Courthouse, 191 N. 1st St., San Jose) and wait for a sheriff’s deputy to escort him or her to the courtroom for the hearing.
Turning to the notice procedure, the parties have selected ILYM Group, Inc. as the settlement administrator. Defendant will provide a list of class members to the administrator within 45 days of the date of preliminary approval of the settlement. The administrator will mail the notice to class members within 14 days of receipt of the class list, after updating class members’ addresses using the National Change of Address Database. The deadline for responses will be 60 days after mailing. Any returned notices will be re-mailed to any forwarding address provided or better address located through a search. Class members who receive a re-mailed notice will have an additional 14 days to respond.
These notice procedures are appropriate and are approved.
CONCLUSION
The Court GRANTS Plaintiffs’ motion for preliminary approval subject to class counsel making the proposed changes to the notice described above. The final approval hearing shall take place on January 18, 2023 at 1:30 pm. in Dept. 1.
Before final approval, Counsel shall submit lodestar information prior to the final approval hearing in this matter so the Court can compare the lodestar information with the requested fees.
***
LAW AND MOTION HEARING PROCEDURES
Parties may appear in person or remotely. Remote appearances must be made through Microsoft Teams, unless otherwise arranged with the Court. Please go to to find the appropriate link.
State and local rules prohibit recording of court proceedings without a court order. These rules apply while in court and also while participating or listening in a hearing remotely. No court order has been issued which would allow recording of any portion of this motion calendar.
The Court does not provide court reporters for proceedings in the complex civil litigation departments. Any party wishing to retain a court reporter to report a hearing may do so in compliance with this Court’s October 13, 2020 Policy Regarding Privately Retained Court Reporters. The court reporter can either be in person or appear remotely.
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Calendar Line 2
Case Name: Hicks v. California Water Service
Case No.: 21CV376394
INTRODUCTION
This is a putative class and Private Attorneys General Act (“PAGA”) action. Plaintiff Bryan Hicks (“Plaintiff”) alleges that Defendant California Water Service (“Defendant”), a public utility company providing drinking water and waste water services to California Residents, failed to provide employees with compliant meal and rest breaks and failed to pay required premiums, failed to pay minimum and overtime wages, issued noncompliant wage statements, and committed other wage and hour violations.
Now before the Court is Plaintiffs’ motion for preliminary approval of a settlement, which is unopposed. As discussed below, the Court is inclined to grant preliminary approval, but the Court requests a supplemental declaration from Plaintiff’s counsel regarding certain issues identified below. Additionally, the Court requests that certain changes be made to the notice and notice procedure.
BACKGROUND
Plaintiff was employed by Defendant from May 2018 to November 2018 as an hourly, non-exempt employee. (First Amended Class Action Complaint (“FAC”), ¶ 23.) According to Plaintiff, Defendant failed to pay employees for all hours worked and for their missed meal and rest periods. (FAC, ¶ 24.) Employees worked for Defendant more than eight hours per day or 40 hours per week but Defendant failed to pay overtime wages. (FAC, ¶ 24.) Defendant failed to timely pay wages during employment and upon separation and failed to provide accurate, itemized wage statements. (FAC, ¶ 38, 120.) Defendant also failed to reimburse employees for required business expenses. (FAC, ¶ 113.)
Based on these allegations, Plaintiff asserts, in the operative First Amended Complaint, putative class claims for: (1) failure to pay overtime wages, in violation of Labor Code section 510, et seq.; (2) unpaid meal period premiums, in violation of Labor Code sections 226.7 and 512, subdivision (a); (3) unpaid rest break premiums, in violation of Labor Code section 226.7; (4) failure to pay minimum wages, in violation of Labor Code sections 1194, 1197, and 1197.1; (5) failure to provide wage when due under Labor Code sections 201 and 202; (6) failure to provide timely wages during employment under Labor Code section; (7) violation of Labor Code section 226 by failing to provide accurate itemized wage statements; (8) failure to keep payroll records, in violation of Labor Code section 1174, subdivision (d); (9) failure to reimburse employees for required expenses under Labor Code sections 2800 and 2802; (10) violation of Business and Professions Code section 17200, et seq.; and (11) representative claim for PAGA penalties (Lab. Code, § 2698, et seq.).
DISCUSSION
I. Plaintiff’s Request to File a Memorandum in Excess of the Page Limit Is Granted
Within the text of Plaintiff’s motion for preliminary approval, he requests to exceed the page limit contained in Cal. Rules of Court, rule 3.1113(d). The Court grants this unopposed request.
II. Legal Standards for Settlement Approval
A. Class Action
Generally, “questions whether a (class action) settlement was fair and reasonable, whether notice to the class was adequate, whether certification of the class was proper, and whether the attorney fee award was proper are matters addressed to the trial court’s broad discretion.” (Wershba v. Apple Computer, Inc. (2001) 91 Cal.App.4th 224, 234–235 (Wershba), disapproved of on other grounds by Hernandez v. Restoration Hardware, Inc. (2018) 4 Cal.5th 260.)
In determining whether a class settlement is fair, adequate and reasonable, the trial court should consider relevant factors, such 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 the class members to the proposed settlement. (Wershba, supra, 91 Cal.App.4th at pp. 244-245, internal citations and quotations omitted.)
In general, the most important factor is the strength of the plaintiffs’ case on the merits, balanced against the amount offered in settlement. (See Kullar v. Foot Locker Retail, Inc. (2008) 168 Cal.App.4th 116, 130 (Kullar).) But the trial court is free to engage in a balancing and weighing of relevant factors, depending on the circumstances of each case. (Wershba, supra, 91 Cal.App.4th at p. 245.) The trial court must examine the “proposed settlement agreement to the extent necessary to reach a reasoned judgment that the agreement is not the product of fraud or overreaching by, or collusion between, the negotiating parties, and that the settlement, taken as a whole, is fair, reasonable and adequate to all concerned.” (Ibid., citation and internal quotation marks omitted.) The trial court also must independently confirm that “the consideration being received for the release of the class members’ claims is reasonable in light of the strengths and weaknesses of the claims and the risks of the particular litigation.” (Kullar, supra, 168 Cal.App.4th at p. 129.) Of course, before performing its analysis the trial court must be “provided with basic information about the nature and magnitude of the claims in question and the basis for concluding that the consideration being paid for the release of those claims represents a reasonable compromise.” (Id. at pp. 130, 133.)
B. PAGA
Labor Code section 2699, subdivision (l)(2) provides that “(t)he superior court shall review and approve any settlement of any civil action filed pursuant to” PAGA. The court’s review “ensur(es) that any negotiated resolution is fair to those affected.” (Williams v. Superior Court (2017) 3 Cal.5th 531, 549.) Seventy-five percent of any penalties recovered under PAGA go to the Labor and Workforce Development Agency (“LWDA”), leaving the remaining twenty-five percent for the aggrieved employees. (Iskanian v. CLS Transportation Los Angeles, LLC (2014) 59 Cal.4th 348, 380, overruled on other grounds by Viking River Cruises, Inc. v. Moriana (2022) ___U.S.___, 2022 U.S. LEXIS 2940.)
Similar to its review of class action settlements, the Court must “determine independently whether a PAGA settlement is fair and reasonable,” to protect “the interests of the public and the LWDA in the enforcement of state labor laws.” (Moniz v. Adecco USA, Inc. (2021) 72 Cal.App.5th 56, 76-77.) It must make this assessment “in view of PAGA’s purposes to remediate present labor law violations, deter future ones, and to maximize enforcement of state labor laws.” (Id. at p. 77; see also Haralson v. U.S. Aviation Servs. Corp. (N.D. Cal. 2019) 383 F. Supp. 3d 959, 971 (“when a PAGA claim is settled, the relief provided for under the PAGA (should) be genuine and meaningful, consistent with the underlying purpose of the statute to benefit the public ….”), quoting LWDA guidance discussed in O’Connor v. Uber Technologies, Inc. (N.D. Cal. 2016) 201 F.Supp.3d 1110 (O’Connor).)
The settlement must be reasonable in light of the potential verdict value. (See O’Connor, supra, 201 F.Supp.3d at p. 1135 (rejecting settlement of less than one percent of the potential verdict).) But a permissible settlement may be substantially discounted, given that courts often exercise their discretion to award PAGA penalties below the statutory maximum even where a claim succeeds at trial. (See Viceral v. Mistras Group, Inc. (N.D. Cal., Oct. 11, 2016, No. 15-CV-02198-EMC) (2016 WL 5907869, at *8-9).)
III. Settlement Process
According to Plaintiffs’ counsel, the parties engaged in significant informal discovery prior to mediation. Defendant produced, inter alia, employment records for Plaintiff and potential class members, a sampling of time and pay data, and relevant policies and procedures.
On February 23, 2022, the parties attended an all-day mediation session with Jeffrey Krivis, Esq., an experienced wage and hour class action mediator. After negotiations with his assistance, they were able to reach the agreement now before the Court.
IV. Settlement Provisions
The non-reversionary gross settlement amount is $2,150,000. Attorney fees of up to $752,500 (35 percent of the gross settlement), litigation costs of up to $25,000, and up to $20,000 in administration costs will be paid from the gross settlement. One hundred seventy-five thousand dollars of the gross settlement amount will be allocated to PAGA penalties, 75 percent of which ($131,250) will be paid to the LWDA, leaving 25 percent ($43,750) for the aggrieved employees. The named plaintiff will seek an incentive award of $8,000. The net settlement amount of approximately $1,169,500 will be allocated to the approximately 1,040 class members proportionally based on their pay periods worked during the class period.
The PAGA payment will be allocated to aggrieved employees on a pro rata basis based on their number of pay periods worked during the PAGA period of February 23, 2020 to August 8, 2022. Based on the information class counsel provides, the Court calculates that the average payment will be around $1,125 to each of the 1,040 class members if all class members do not opt out. Class members will not be required to submit a claim to receive their payments but instead may opt out if they wish. For tax purposes, settlement payments will be allocated 40 percent to wages and 60 percent to penalties and interest. PAGA settlement payments will be allocated 100 percent to penalties. The employer’s share of payroll taxes will be paid in addition to the gross settlement. Checks uncashed after 180 days will be cancelled and the funds will be transferred to Leadership Counsel for Justice & Accountability, a 501(c)(3) nonprofit organization.
In exchange for the settlement, class members who do not opt out will release “all claims under state, federal, or local law during the Release Period that were or could have been alleged based upon the facts pleaded in the Action,” including specified wage and hour claims. The release is appropriately tailored to the factual allegations at issue. (See Amaro v. Anaheim Arena Management, LLC (2021) 69 Cal.App.5th 521, 537.) And, the PAGA release is appropriately limited to “all claims, under PAGA for penalties during the PAGA Period that were or could have been alleged based upon the facts pleaded in the Action and the PAGA Notice, for alleged violations” including specified wage and hour claims. Consistent with the statute, aggrieved employees will not be able to opt out of the PAGA portion of the settlement.
V. Fairness of Settlement
Defendant asserted various defenses, denying all liability for each claim and articulating that it fully complied with all employment laws and that all time was accurately recorded. Defendant also maintains that the claims are inappropriate for class treatment.
Based on the records provided by Defendant, class counsel determined that the maximum potential damages for the failure to pay overtime claim was $11,046,600 but after discounts for the risk associated with litigation, the estimated value of the claim was $795,355.20. The maximum value of the failure to pay minimum wage claim was calculated to be $7,363,800 or $220,914 after discounts. The maximum exposure for the unpaid meal premiums was estimated at $7,363,800 or $530,193.60 after discounts. Potential maximum recovery for waiting time penalties was estimated to be $2,228,776.80 or $89,151.07 after discounts. With respect to the failure to reimburse business expenses claim, the maximum potential value was estimated to be $1,080,000 or $34,560 after discounts. Plaintiff’s counsel calculated potential PAGA penalties to be $1,173,200 at maximum or $98,548.80 after discounts.
In light of the large portion of the case’s value attributable to highly uncertain penalties, the settlement achieves a good result for the class. The PAGA settlement amount of $175,000 is significant, comprising about eight percent of the total settlement amount.
For purposes of preliminary approval, the Court finds that the settlement is fair and reasonable to the class, and the PAGA allocation is genuine, meaningful, and reasonable in light of the statute’s purposes. Of course, the Court retains an independent right and responsibility to review the requested attorney fees and award only so much as it determines to be reasonable. (See Garabedian v. Los Angeles Cellular Telephone Co. (2004) 118 Cal.App.4th 123, 127–128.) Counsel shall provide lodestar information prior to the final approval hearing in this matter so the Court can compare the lodestar information with the requested fees. (See Laffitte v. Robert Half Intern. Inc. (2016) 1 Cal.5th 480, 504 (trial courts have discretion to double-check the reasonableness of a percentage fee through a lodestar calculation).)
VI. Proposed Settlement Class
Plaintiff requests that the following settlement class be provisionally certified: “All current and former hourly non-exempt Cal Water employees who worked for Cal Water in California from February 23, 2017, to and including August 8, 2022(.)”
A. Legal Standard for Certifying a Class for Settlement Purposes
Rule 3.769(d) of the California Rules of Court states that “(t)he court may make an order approving or denying certification of a provisional settlement class after (a) preliminary settlement hearing.” Code of Civil Procedure section 382 authorizes certification of a class “when the question is one of a common or general interest, of many persons, or when the parties are numerous, and it is impracticable to bring them all before the court ….”
Code of Civil Procedure section 382 requires the plaintiff to demonstrate by a preponderance of the evidence: (1) an ascertainable class and (2) a well-defined community of interest among the class members. (Sav-On Drug Stores, Inc. v. Superior Court (2004) 34 Cal.4th 319, 326, 332 (Sav-On Drug Stores).) “Other relevant considerations include the probability that each class member will come forward ultimately to prove his or her separate claim to a portion of the total recovery and whether the class approach would actually serve to deter and redress alleged wrongdoing.” (Linder v. Thrifty Oil Co. (2000) 23 Cal.4th 429, 435.) The plaintiff has the burden of establishing that class treatment will yield “substantial benefits” to both “the litigants and to the court.” (Blue Chip Stamps v. Superior Court (1976) 18 Cal.3d 381, 385.)
In the settlement context, “the court’s evaluation of the certification issues is somewhat different from its consideration of certification issues when the class action has not yet settled.” (Luckey v. Superior Court (2014) 228 Cal.App.4th 81, 93.) As no trial is anticipated in the settlement-only context, the case management issues inherent in the ascertainable class determination need not be confronted, and the court’s review is more lenient in this respect. (Id. at pp. 93–94.) But considerations designed to protect absentees by blocking unwarranted or overbroad class definitions require heightened scrutiny in the settlement-only class context, since the court will lack the usual opportunity to adjust the class as proceedings unfold. (Id. at p. 94.)
B. Ascertainable Class
A class is ascertainable “when it is defined in terms of objective characteristics and common transactional facts that make the ultimate identification of class members possible when that identification becomes necessary.” (Noel v. Thrifty Payless, Inc. (2019) 7 Cal.5th 955, 980 (Noel).) A class definition satisfying these requirements “puts members of the class on notice that their rights may be adjudicated in the proceeding, so they must decide whether to intervene, opt out, or do nothing and live with the consequences. (Citation.) This kind of class definition also advances due process by supplying a concrete basis for determining who will and will not be bound by (or benefit from) any judgment.” (Ibid.)
“As a rule, a representative plaintiff in a class action need not introduce evidence establishing how notice of the action will be communicated to individual class members in order to show an ascertainable class.” (Noel, supra, 7 Cal.5th at p. 984.) Still, it has long been held that “(c)lass members are ‘ascertainable’ where they may be readily identified … by reference to official records.” (Rose v. City of Hayward (1981) 126 Cal. App. 3d 926, 932, disapproved of on another ground by Noel, supra, 7 Cal.5th 955; see also Cohen v. DIRECTV, Inc. (2009) 178 Cal.App.4th 966, 975-976 (“The defined class of all HD Package subscribers is precise, with objective characteristics and transactional parameters, and can be determined by DIRECTV’s own account records. No more is needed.”).)
Here, the estimated 1,040 class members are readily identifiable based on Defendant’s employment and payroll records, and the settlement class is defined based on objective characteristics. The Court finds that the settlement class is numerous, ascertainable, and appropriately defined.
C. Community of Interest
The “community-of-interest” requirement encompasses three factors: (1) predominant questions of law or fact, (2) class representatives with claims or defenses typical of the class, and (3) class representatives who can adequately represent the class. (Sav-On Drug Stores, supra, 34 Cal.4th at pp. 326, 332.)
For the first community of interest factor, “(i)n order to determine whether common questions of fact predominate the trial court must examine the issues framed by the pleadings and the law applicable to the causes of action alleged.” (Hicks v. Kaufman & Broad Home Corp. (2001) 89 Cal.App.4th 908, 916 (Hicks).) The court must also examine evidence of any conflict of interest among the proposed class members. (See J.P. Morgan & Co., Inc. v. Superior Court (2003) 113 Cal.App.4th 195, 215.) The ultimate question is whether the issues which may be jointly tried, when compared with those requiring separate adjudication, are so numerous or substantial that the maintenance of a class action would be good for the judicial process and to the litigants. (Lockheed Martin Corp. v. Superior Court (2003) 29 Cal.4th 1096, 1104-1105 (Lockheed Martin).) “As a general rule if the defendant’s liability can be determined by facts common to all members of the class, a class will be certified even if the members must individually prove their damages.” (Hicks, supra, 89 Cal.App.4th at p. 916.)
Here, it appears that common legal and factual issues predominate. Plaintiff’s claims arise from Defendant’s wage and hour practices, which would apply to the other class members, who are similarly-situated.
As to the second factor,
The typicality requirement is meant to ensure that the class representative is able to adequately represent the class and focus on common issues. It is only when a defense unique to the class representative will be a major focus of the litigation, or when the class representative’s interests are antagonistic to or in conflict with the objectives of those she purports to represent that denial of class certification is appropriate. But even then, the court should determine if it would be feasible to divide the class into subclasses to eliminate the conflict and allow the class action to be maintained.
(Medrazo v. Honda of North Hollywood (2008) 166 Cal. App. 4th 89, 99, internal citations, brackets, and quotation marks omitted.)
Like other members of the class, Plaintiffs were employed by Defendant as non-exempt employees and they allege that they suffered the violations at issue. The anticipated defenses are not unique to Plaintiff as they are based on Defendant’s compliance with applicable labor laws and its own policies and procedures and whether it properly calculated wages. There is no indication before the Court that Plaintiffs’ interests are otherwise in conflict with those of the class. The Court finds that Plaintiffs have sufficiently demonstrated typicality.
Finally, adequacy of representation “depends on whether the plaintiff’s attorney is qualified to conduct the proposed litigation and the plaintiff’s interests are not antagonistic to the interests of the class.” (McGhee v. Bank of America (1976) 60 Cal.App.3d 442, 450.) The class representative does not necessarily have to incur all of the damages suffered by each different class member in order to provide adequate representation to the class. (Wershba, supra, 91 Cal.App.4th at p. 238.) “Differences in individual class members’ proof of damages (are) not fatal to class certification. Only a conflict that goes to the very subject matter of the litigation will defeat a party’s claim of representative status.” (Ibid., internal citations and quotation marks omitted.)
Here, Plaintiffs would appear to have the same interest in maintaining this action as any other class member would have. Plaintiffs are represented by experienced counsel who are qualified to represent the class. The Court finds that Plaintiffs and their counsel are adequate to represent the class.
D. Substantial Benefits of Class Certification
“(A) class action should not be certified unless substantial benefits accrue both to litigants and the courts. . . .” (Basurco v. 21st Century Ins. (2003) 108 Cal.App.4th 110, 120, internal quotation marks omitted.) The question is whether a class action would be superior to individual lawsuits. (Ibid.) “Thus, even if questions of law or fact predominate, the lack of superiority provides an alternative ground to deny class certification.” (Ibid.) Generally, “a class action is proper where it provides small claimants with a method of obtaining redress and when numerous parties suffer injury of insufficient size to warrant individual action.” (Id. at pp. 120–121, internal quotation marks omitted.)
Here, the class is large, comprised of an estimated 1,040 class members. It would surely be inefficient for the Court to hear and decide the same issues separately and repeatedly for each class member. Further, it would be cost prohibitive for each class member to file suit individually, as each member would have the potential for little to no monetary recovery. It is clear that a class action provides substantial benefits to both the litigants and the Court in this case.
VII. Notice
The content of a class notice is subject to court approval. (Cal. Rules of Court, rule 3.769(f).) “The notice must contain an explanation of the proposed settlement and procedures for class members to follow in filing written objections to it and in arranging to appear at the settlement hearing and state any objections to the proposed settlement.” (Ibid.) In determining the manner of the notice, the court must consider: “(1) The interests of the class; (2) The type of relief requested; (3) The stake of the individual class members; (4) The cost of notifying class members; (5) The resources of the parties; (6) The possible prejudice to class members who do not receive notice; and (7) The res judicata effect on class members.” (Cal. Rules of Court, rule 3.766(e).)
Here, the notice describes the lawsuit, explains the settlement, and instructs class members that they may opt out of the settlement (except the PAGA component) or object. The gross settlement amount and estimated deductions are provided. Class members are informed of their qualifying pay periods as reflected in Defendant’s records and are instructed how to dispute this information. They are given 45 days to request exclusion from the class or submit a written objection to the settlement.[3] Class members are instructed that they may appear at the final fairness hearing to make an oral objection without submitting a written objection.
The court notes that Plaintiff does not indicate whether the notice will be provided in any languages other than English and whether such translation would be reasonably necessary for the class members to understand the notice. Further, Plaintiff has not provided a breakdown of the expected costs of administration of the settlement. The Court requests that class counsel provide, prior to the hearing on this matter if possible, a supplemental declaration indicating whether notice should be provided in languages other than English and why or why not and providing a breakdown of the expected costs of administration.
The form of notice is generally adequate, but must be modified to instruct class members that they may opt out of or object to the settlement simply by providing their name, without the need to provide their phone number or other personal information.
With regard to appearances at the final fairness hearing, the notice shall be further modified to instruct class members as follows:
The judge overseeing this case encourages remote appearances. (As of August 15, 2022, the Court’s remote platform is Microsoft Teams.) Class members who wish to appear remotely should contact class counsel at least three days before the hearing if possible. Instructions for appearing remotely are provided at
and should be reviewed in advance. Class members may appear remotely using the Microsoft Teams link for Department 1 (Afternoon Session) or by calling the toll free conference call number for Department 1. Any class member who wishes to appear in person should check in at Court Services (1st floor, Downtown Superior Courthouse, 191 N. 1st St., San Jose) and wait for a sheriff’s deputy to escort him or her to the courtroom for the hearing.
Turning to the notice procedure, the parties have selected Phoenix Settlement Administrators as the settlement administrator. Defendant will provide a list of class members to the administrator within 30 days of the date of preliminary approval of the settlement. The administrator will mail the notice to class members within 15 days of receipt of the class list. The deadline for responses will be 45 days after mailing. Any returned notices will be re-mailed to any forwarding address provided or better address located using a reasonable method, including skip tracing. Class members who receive a re-mailed notice will have an additional 15 days to respond.
Given that class members only have 45 days to respond to the notices, the administrator must use the National Change of Address Database to locate updated addresses for class members prior to the initial mailing, to minimize time lost due to re-mailing. With that modification, the notice procedures are appropriate and are approved.
The Court also notes that paragraph 59 of the settlement agreement provides that, within 14 days of the response deadline, Defendant will have the option to void the settlement agreement if 10 percent of the individuals eligible to become class members have opted out or are deemed by the court not to be bound by the settlement. Although such a provision is not inherently unfair, (see Hefler v. Wells Fargo & Co. (N.D.Cal. Dec. 17, 2018, No. 16-cv-05479-JST) (2018 U.S.Dist.LEXIS 213045, at *22)), the Court wonders whether class members should be informed of this provision in the notice. Class counsel’s supplemental declaration should address this issue.
CONCLUSION
Prior to the hearing on this matter if possible, Plaintiffs’ counsel shall file a supplemental declaration addressing whether the notice should be provided in any language other than English and whether the class members should be notified regarding Defendant’s option to void the settlement agreement. The Court also requests that Plaintiff make the changes to the class notice identified above and that the administrator conduct a search of the National Change of Address Database to update the addresses of potential class members after receiving the class list and prior to sending the class notice.
If Plaintiff’s motion for preliminary approval is ultimately granted, the final approval hearing shall take place on February 15, 2024 at 1:30 p.m. in Dept. 1.
Before final approval, Counsel shall submit lodestar information prior to the final approval hearing in this matter so the Court can compare the lodestar information with the requested fees.
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Case Name: Sandra Skinner v. TheKey of California, LLC, et al.
Case No.: 23CV409937
This is an action under the Private Attorneys General Act (“PAGA”). Plaintiff alleges that Defendants TheKey of California, LLC, TheKey Holdings, LLC, Home Care Assistance, Inc., and Home Care Assistance, LLC (collectively, “Defendants”), failed to pay wages for off-the-clock work, failed to provide meal and rest breaks or pay associated premiums, failed to reimburse expenses, and committed other wage and hour violations.
Before the Court is Defendants’ motion to compel arbitration of Plaintiff’s individual PAGA claim and to stay this action pending resolution of the arbitration. Plaintiff opposes the motion, arguing the arbitration agreement names the wrong employer and that the Federal Arbitration Act does not apply to the agreement.
For the reasons discussed below, the Court GRANTS Defendant’s motion.
I. BACKGROUND
As alleged in the operative complaint, Plaintiff worked for Defendants as an in-home care-giver. (Representative Action Complaint, ¶¶ 1, 11, 13, 20.) Plaintiff alleges that she and other employees performed off-the-clock work and did not receive all wages earned. (Id. at ¶ 12.) Defendants failed to accurately record all hours worked and failed to pay overtime. (Id. at ¶¶ 13-14.) Defendants had a policy of automatically deducting time for meal periods from employees’ pay, regardless of whether the employees received a meal period or not. (Id. at ¶ 18.) Defendants failed to provide employees with the required meal and rest periods. (Id. at ¶¶ 18-23.)
In addition, Defendants failed to reimburse employees for necessary business expenses and to provide complete and accurate wage statements reflecting all hours worked including overtime. (Complaint at ¶¶ 26-33.)
Based on these allegations, Plaintiff asserts a claim for PAGA penalties.
II. MOTION TO COMPEL ARBITRATION
Defendants move to compel arbitration based on the Caregiver Employment Agreement (“Agreement”) attached to the Declaration of Sandi Gunnett as Exhibit 1. Plaintiff opposes the motion, contending the Agreement names the wrong employer and that the Federal Arbitration Act does not apply.
A. Legal Standards
“The FAA (Federal Arbitration Act), which includes both procedural and substantive provisions, governs (arbitration) agreements involving interstate commerce.” (Avila v. Southern California Specialty Care, Inc. (2018) 20 Cal.App.5th 835, 840.) However, “(t)he procedural aspects of the FAA do not apply in state court absent an express provision in the arbitration agreement.” (Ibid.) Here, the Agreement states that it “is governed by the Federal Arbitration Act, 9 U.S.C. § 1 et seq.” But since the Agreement does not expressly state that the FAA’s procedural aspects govern, California arbitration law controls procedure.
Under such California arbitration law, a court must grant a petition to compel arbitration “if it determines that an agreement to arbitrate … exists, unless it determines that: (a) The right to compel arbitration has been waived by the petitioner; or (b) Grounds exist for the revocation of the agreement,” among other exceptions. (Code Civ. Proc., § 1281.2.) The moving party must prove by a preponderance of evidence the existence of the arbitration agreement and that the dispute is covered by the agreement. (See Cruise v. Kroger Co. (2015) 233 Cal.App.4th 390, 396 (under both federal and state law, “the threshold question presented by a petition to compel arbitration is whether there is an agreement to arbitrate”); Rosenthal v. Great Western Fin’l Securities Corp. (1996) 14 Cal.4th 394, 413 (Rosenthal) (moving party’s burden is a preponderance of evidence).) The burden then shifts to the resisting party to prove a ground for denial. (Rosenthal, supra, 14 Cal.4th at p. 413.)
“In determining the rights of parties to enforce an arbitration agreement within the FAA’s scope, courts apply state contract law while giving due regard to the federal policy favoring arbitration.” (Pinnacle Museum Tower Assn. v. Pinnacle Market Development (US), LLC (2012) 55 Cal.4th 223, 236.)
But the FAA’s policy favoring arbitration … is merely an acknowledgment of the FAA’s commitment to overrule the judiciary’s longstanding refusal to enforce agreements to arbitrate and to place such agreements upon the same footing as other contracts. Or in another formulation: The policy is to make arbitration agreements as enforceable as other contracts, but not more so. Accordingly, a court must hold a party to its arbitration contract just as the court would to any other kind.
(Morgan v. Sundance, Inc. (2022) ___U.S.___ (142 S.Ct. 1708, 1713) (Morgan), internal citations and quotation marks omitted.)
B. Existence and Scope of Agreement to Arbitrate
To show that Plaintiff consented to the Agreement, Defendants provide a declaration by Sandi Gunnet, Human Resources Manager at TheKey of California, LLC.[4] Ms. Gunnet’s declaration establishes that Plaintiff signed the Agreement on June 29, 2021—which Plaintiff does not dispute.
The Agreement contains an “Arbitration Agreement” at section 9. That section provides, “This Arbitration Agreement applies to any dispute arising out of or related to Employee’s … employment with HCA or one of its affiliates … or termination of employment regardless of its date of accrual and survives after the employment relationship terminates.” Thus, the Arbitration Agreement encompasses this employment action as an initial matter.
1. Mutual Assent to the Agreement
In opposition to the Defendant’s motion, Plaintiff contends the Agreement is not enforceable because it names the wrong employer. (Opposition at pp. 2-4.) More specifically, she asserts she was employed by Home Care Assistance of California, LLC, which is now TheKey of California, LLC, and neither of these entities are named in the Agreement. Instead, the Agreement names an entity called Home Care Assistance (or “HCA”). Thus, according to Plaintiff, the Agreement is unenforceable because its terms are uncertain.
In reply, Defendants assert that Plaintiff’s employer is a party to the Agreement because it can be identified as a party by reference to the surrounding circumstances. (Reply at pp. 2-5.)
“In California, general principles of contract law determine whether the parties have entered into a binding agreement to arbitrate.” (Serafin v. Balco Properties Ltd., LLC (2015) 235 Cal.App.4th 165, 173 (internal quotation marks and citations omitted).) “ ‘A contract must receive such an interpretation as will make it … reasonable, and capable of being carried into effect, if it can be done without violating the intention of the parties.’ ” (Rutledge v. Hewlett-Packard Co. (2015) 238 Cal.App.4th 1164, 1182 (quoting Civ. Code, § 1643).)
“(I)n circumstances generally involving arbitration provisions, when a petitioner files a petition to compel arbitration of that arbitration provision, a trial court must make preliminary factual determinations whether (1) there is an arbitration agreement; and (2) the petitioner is party to that agreement or can otherwise enforce the agreement.” (Bouton v. USAA Casualty Ins. Co. (2008) 167 Cal.App.4th 412, 424 (Bouton); Code Civ. Proc., § 1281,2; see also City of Hope v. Bryan Cave, L.L.P. (2002) 102 Cal.App.4th 1356, 1369.)
While the general rule is that only signatories to an arbitration agreement may enforce it, there are exceptions to that general rule. (Rowe v. Exline (2007) 153 Cal.App.4th 1286, 1284 (a nonsignatory sued as an agent of a signatory may enforce an arbitration agreement); see also Bouton, supra, 167 Cal.App.4th at p. 424 (agents, alter egos, or intended third party beneficiaries may enforce an arbitration agreement).) Further, “the writing memorializing an arbitration agreement need not be signed by both parties in order to be upheld as a binding arbitration agreement.” (Serafin v. Balco (2015) 235 Cal.App.4th 165, 175.) The presence or absence of a signature is not dispositive, but rather “it is the presence or absence of evidence of an agreement to arbitrate which matters.” (Ibid. (original italics).)
Here, the Agreement is on HCA letterhead and states that “Home Care Assistance (‘HCA’) enters into this Caregiver Employment Agreement (the “Agreement”) with (the employee).” The Arbitration Agreement, too, specifically states that it “is a contract” and is replete with language indicating that the “parties” both “agree” to various terms. Section 10 of the Agreement (“Assignment and Successors”) immediately follows the Arbitration Agreement at section 9 and states “This Agreement shall be binding upon the parties hereto and upon their heirs, administrators, representatives, executors, successors, and assigns and shall inure to the benefit of said parties and each of them and to their heirs, administrators, representatives, executors, successors, and assigns.”
These facts are sufficient to establish that Plaintiff’s employer intended to be bound by the Agreement, including the Arbitration Agreement. (See Davis v. Kozak (2020) 53 Cal.App.5th 897, 915 (absence of signature line for company did not show arbitration agreement lacked mutuality; agreement’s presentation on company letterhead and language indicating both parties would be bound showed that “(a)s a whole, the agreement is () reasonably construed as both parties consenting to arbitration of any disputes either party brings involving or relating to (the employee’s employment”).) The undisputed fact that Plaintiff’s employer was formerly known as “HCA of California, LLC” but is now known as “TheKey of California, LLC,” does not alter this conclusion. (See Opposition at p. 2 (“According to the Declaration of Sandi Gunnett, Plaintiff was employed by HCA of California LLC which is now known as TheKey of California, LLC.)
The authority presented by Plaintiff does not state otherwise. Plaintiff first relies upon Westlye v. Look Sports, Inc. (1993) 17 Cal.App.4th 1715 (Westlye). In that case, the plaintiff was injured while skiing using equipment rented from a ski shop. (Id. at p. 1723.) The amended complaint alleged, among other things, a cause of action for strict product liability against both the ski shop and the “distributor defendants” who supplied the equipment to the ski shop. (Id. at pp. 1723-1724.) The agreement in question was a release signed by plaintiff expressing acceptance of the equipment “as is,” and agreeing to hold the ski shop harmless. (Id. at p. 1725.)
The appellate court in Westlye found that the release plaintiff signed did not apply to the distributor defendants because the agreement was between plaintiff and the ski shop and made no mention of the distributor defendants. (Westlye, 17 Cal.App.4th at pp. 1727-1728.) The court said because the distributor defendants were not named in the agreement they attempted to enforce, it was their burden to show some basis for extending the agreement to them. (Id. at p. 1728.) The appellate court said the distributor defendants failed to make any such legal argument in the trial court or on appeal, and observed that a release given to one tortfeasor does not discharge others “unless it terms so provide.” (Ibid.) Westlye is readily distinguishable from the instant case because, here, the terms specifically provide that the Agreement shall apply to the parties’ “successors and assigns,” and the party seeking to invoke the contract is not an unknown third party, but Plaintiffs employer operating under a different legal name. (Gunnett Decl. at Ex. 1.)
Plaintiff also relies upon Ahlstrom v. DHI Mortgage Company, Ltd., L.P. (2021) 21 F.4th 631 (Ahlstrom). There, the plaintiff filed actions against his employer, DHI Mortgage Company, Ltd.’s (“DHIM”), and its parent entities, D.R. Horton and DHI Mortgage Company GP. (Id. at pp. 632-633.) As part of his employee onboarding, plaintiff signed an arbitration agreement that named only himself and the parent entity D.R. Horton, Inc., and did not name plaintiff’s real employer DHIM as a party. (Id.at p. 633.) DHIM removed the action to the Northern District of California, which granted its motion to compel arbitration. (Id. at pp. 633-634.) The appellate court found that because the document as drafted “describes and governs a relationship between (plaintiff) and the D.R. Horton that does not exist,” there was never a “properly formed agreement to arbitrate.” (Id. at p. 636.) DHIM never argued that it was left out of the agreement by mistake, but rather that an agreement with the parent company D.R. Horton as the employer also encompasses its subsidiaries. (Ibid.) The appellate court rejected this argument, emphasizing that nowhere in the agreement was “there any specific reference Ahlstrom’s actual employer, DHIM.” (Ibid.)
Here, by contrast, Defendants do not argue that Plaintiff entered into the Agreement with a holding company, and that such agreement encompasses Plaintiff’s actual employer by virtue of it being a subsidiary of the holding company. Rather, Defendants set forth facts establishing that Plaintiff entered into the Agreement with his actual employer in this case. (Gunnett Decl., ¶¶ 1, 4 (stating that prior to March 2022, Defendant TheKey, LLC was known as Home Care Assistance of California, LLC (or ‘HCA’), and that Plaintiff worked for HCA from June 2021 to December 2021).) Again, the fact that the employer has undisputedly changed its entity form or legal name does not alter the analysis.
In sum, the facts are sufficient to establish that Plaintiff and Plaintiff’s employer are parties to the Agreement, and the Arbitration Agreement encompasses the employment in this case.
2. Representative Action Waiver
Key to its application to the PAGA claim at issue here, the Agreement sets forth a waiver of representative claims at section 9(ii),:
ii. Class, Collective and Representative Action Waiver. This Arbitration Agreement affects your ability to participate in class, collective or representative actions. Both HCA and you agree to bring any dispute in arbitration on an individual basis only, and not on a class, collective, or private attorney general representative basis on behalf of others. There will be no right or authority for any dispute to be brought, heard or arbitrated as a class, collective, representative or private attorney general action, or as a member in any such class, collective, representative or private attorney general proceeding (“Class Action Waiver”). The Class Action Waiver does not apply to any claim you bring in arbitration as a private attorney general solely on your own behalf and not on behalf of others. Notwithstanding any other provision of this Arbitration Agreement or the AAA Rules, disputes regarding the validity, enforceability or breach of the Class Action Waiver may be resolved only by a civil court of competent jurisdiction and not by an arbitrator. In any case in which (1) the dispute is filed as a class, collective, representative or private attorney general action and (2) there is a final judicial determination that all or part of the Class Action Waiver is unenforceable, the class, collective, representative and/or private attorney general action to that extent must be litigated in a civil court of competent jurisdiction, but the portion of the Class Action Waiver that is enforceable shall be enforced in arbitration. … The Class Action Waiver shall be severable in any case in which the dispute is filed as an individual action and severance is necessary to ensure that the individual action proceeds in arbitration.
Plaintiff appears to argue that the representative action waiver is not enforceable despite the Supreme Court’s recent holding in Viking River Cruises, Inc. v. Moriana (2022) 596 U.S. ___ (213 L. Ed. 2d 179, 142 S.Ct. 1906) (Viking River). So the Court’s first task is to apply Viking River to the specific language of the parties’ Agreement here.
3. Impact of Viking River
a. Viking River
The United States Supreme Court granted certiorari in Viking River “to decide whether the (FAA) preempts a rule of California law that invalidates contractual waivers of the right to assert representative claims under (PAGA).” (Viking River, supra, 142 S.Ct. at p. 1913.) That rule of California law was established by Iskanian v. CLS Transportation Los Angeles, LLC (2014) 59 Cal.4th 348 (Iskanian).
In answering that question, the Supreme Court distinguished between two aspects of Iskanian’s holding:
Iskanian’s principal rule prohibits waivers of “representative” PAGA claims in the … sense (that they are brought by employees acting as agents or proxies of the state). That is, it prevents parties from waiving representative standing to bring PAGA claims in a judicial or arbitral forum. But Iskanian also adopted a secondary rule that invalidates agreements to separately arbitrate or litigate “individual PAGA claims for Labor Code violations that an employee suffered,” on the theory that resolving victim-specific claims in separate arbitrations does not serve the deterrent purpose of PAGA. (Citations.)
(Viking River, supra, 142 S.Ct. at pp. 1916–1917, italics original.) Viking River left the first, “principal” holding of Iskanian intact. But it held that “the FAA preempts the rule of Iskanian insofar as it precludes division of PAGA actions into individual and non-individual claims through an agreement to arbitrate.” (Id. at p. 1925.) Critical to the outcome here, Viking River applied the severability provision in the agreement before it to hold that the valid portion of the waiver must be “enforced in arbitration”:
The agreement between Viking and Moriana purported to waive “representative” PAGA claims. Under Iskanian, this provision was invalid if construed as a wholesale waiver of PAGA claims. And under our holding, that aspect of Iskanian is not preempted by the FAA, so the agreement remains invalid insofar as it is interpreted in that manner. But the severability clause in the agreement provides that if the waiver provision is invalid in some respect, any “portion” of the waiver that remains valid must still be “enforced in arbitration.” Based on this clause, Viking was entitled to enforce the agreement insofar as it mandated arbitration of Moriana’s individual PAGA claim. The lower courts refused to do so based on the rule that PAGA actions cannot be divided into individual and non-individual claims. Under our holding, that rule is preempted, so Viking is entitled to compel arbitration of Moriana’s individual claim.
(Viking River, supra, 142 S.Ct. at pp. 1924–1925, italics added.)
b. Discussion
Here, the representative action waiver and associated severability clause in the Arbitration Agreement are comparable to the language at issue in Viking River. Plaintiff urges that due to the local nature of the employment, the FAA does not apply, and absent FAA applicability, Viking River does not govern. But this argument overlooks the plain language of the Arbitration Agreement, which expressly contemplates the arbitration of “any claim you bring in arbitration as a private attorney general solely on your own behalf and not on behalf of others.” And the Court cannot simply disregard Viking River, which held that there is an individual PAGA claim between the representative plaintiff and the employer, which the plaintiff may agree to arbitrate even without the state’s consent. Here, that claim has not been carved out of Plaintiff’s complaint, and it must be arbitrated per the terms of the Agreement.
C. FAA Applicability
In support of their motion to compel arbitration, Defendants assert the FAA governs the
Arbitration Agreement. (Memo at pp. 9-11.) In opposition, Plaintiff contends that even if the Agreement is enforceable, the FAA does not apply to the Agreement because there is no evidence that her employment involved interstate commerce. (Opposition at pp. 4-7.) In reply, Defendants contend the FAA applies because Congress has explicitly determined that the type of services Plaintiff performed affect commerce. (Reply at pp. 7-10.)[5]
The gravamen of Plaintiff’s position concerning the inapplicability of the FAA is that her employment as in-home care giver was effectively local or intrastate in nature, and thus the Agreement pertaining to it did not involve interstate commerce. (Opposition at pp. 4-7.) She asserts: “Defendants provide no evidence that Plaintiff’s employment was anything other than local intrastate employment.” (Id. at p. 4:26-27.) She further contends there is “no evidence for example that as part of her employment, Plaintiff handled goods that were travelling in interstate commerce,” and that Home Care Assistance is headquartered in San Francisco.” (Id. at p. 5:1-6.)
However, “Congress may regulate purely local activities, so long as they are part of an economic class of activities that have a substantial effect on interstate commerce.” (Evenskaas v. California Transit, Inc. (2022) 81 Cal.App.5th 285, 293 (Evenskaas) (internal quotations marks and citations omitted).) “Consistent with Congress’s power to regulate an entire class of activity, FAA preemption does not require that an agreement has a specific effect on interstate commerce.” (Ibid.) The FAA even applies in individual cases “without showing any specific effect upon interstate commerce if in the aggregate the economic activity in question would represent a general practice … subject to federal control… (Citations.).” (Id. at p. 294 (internal quotation marks omitted).) For example, in Evenskaas, the appellate court found that the duties of a driver providing services solely within Los Angeles County involved interstate commerce because “even when providing only local transportation services … drivers are almost certain to use highways, one of the ‘instrumentalities of interstate commerce’ (citation), as well as vehicles that have at some point traveled across state lines.” (Id. at p. 295.)
Here, Plaintiff’s employment as an in-home care giver involved interstate commerce in the aggregate the economic activity in question represents a general practice subject to federal control and making use of instrumentalities of interstate commerce. Defendant TheKey, LLC has locations and provides services in more than twenty states, and recruits caregivers nationwide. (Gunnett Decl. at ¶5.) Further, Plaintiff herself sets forth in her Complaint that her job required her to work on site at the homes of different clients and she was required to use her vehicles to perform her job duties. (Complaint at ¶¶ 20, 26.) Congress also has explicitly regulated the type of services Plaintiff performs under the Fair Labor Standards Act (FLSA), specifically stating “the employment of persons in domestic service in households affect commerce.” (29 U.S.C § 202, subd. (a).) Under the FLSA, “(t)he term domestic service employment means services of a household nature performed by an employee in or about a private home (permanent or temporary). The term includes services performed by employees such as companions, babysitters, cooks, waiters, butlers, valets, maids, housekeepers, nannies, nurses, janitors, laundresses, caretakers, handymen, gardeners, home health aides, personal care aides, and chauffeurs of automobiles for family use.” (29 C.F.R. § 552.3.) While the Court acknowledges Plaintiff has presented authority in opposition, the Court finds such authority to be readily distinguishable.[6]
Thus, the Court finds that the FAA does apply to the Agreement.
D. Remaining Issues
In support of their motion to compel arbitration, the Defendants also argue that, even if the Agreement refers to an entity other than Plaintiff’s employer, Plaintiff is equitably estopped from denying the existence of the Agreement. (Id. at pp. 5-7.) As the Court has found that the Agreement does refer to Plaintiff’s employer and encompasses Plaintiff’s such employment, it declines to address Defendant’s equitable estoppel argument.
Defendants assert the Agreement satisfies the factors set forth by the California Supreme Court in Armendariz v. Foundation Health Psychcare Services, Inc. (2000) 24 Cal.4th 83. (Memo at pp. 12-13.) Plaintiff effectively concedes this argument by failing to address it in her opposition or otherwise put the issue before the Court. Given the Court’s ruling on the petition, the Court need not address this issue.
III. REPRESENTATIVE CLAIM/MOTION FOR STAY
As already discussed, Defendants are entitled to compel arbitration of Plaintiff’s individual PAGA claim under Viking River. But the Agreement’s purported waiver of representative PAGA claims remains invalid under Iskanian. Defendant contends that this action should be stayed pending the completion of arbitration, citing Code of Civil Procedure section 1281.4 and the case of Adolph v. Uber Technologies, Inc. (July 17, 2023, No. S274671) ___Cal.5th___ (2023 Cal. LEXIS 4099) (Adolph). In opposition, Plaintiff does not address Defendants’ argument regarding a stay of this action.
Since Defendants brought the instant motion, the California Supreme Court has issued its decision in Adolph, stating: “Where a plaintiff has brought a PAGA action comprising individual and non-individual claims, an order compelling arbitration of the individual claims does not strip the plaintiff of standing as an aggrieved employee to litigate claims on behalf of other employees under PAGA.” (Adolph, supra, 2023 Cal. LEXIS 4099 at *5.)
The Adolph court suggested how the representative PAGA claim might be dealt with procedurally:
First, the trial court may exercise its discretion to stay the non-individual claims pending the outcome of the arbitration pursuant to section 1281.4 of the Code of Civil Procedure. Following the arbitrator’s decision, any party may petition the court to confirm or vacate the arbitration award under section 1285 of the Code of Civil Procedure. If the arbitrator determines that Adolph is an aggrieved employee in the process of adjudicating his individual PAGA claim, that determination, if confirmed and reduced to a final judgment (Code Civ. Proc., § 1287.4), would be binding on the court, and Adolph would continue to have standing to litigate his non-individual claims. If the arbitrator determines that Adolph is not an aggrieved employee and the court confirms that determination and reduces it to a final judgment, the court would give effect to that finding, and Adolph could no longer prosecute his non-individual claims due to lack of standing.
(Adolph, supra, (2023 Cal. LEXIS 4099, at *22-23).) Accordingly, the Court will grant Defendants’ request to stay the representative PAGA claim.
IV. CONCLUSION
For the reasons discussed above, the Court GRANTS Defendants’ motion to compel arbitration as to the individual component of Plaintiff’s PAGA claim. The Court also STAYS Plaintiff’s representative PAGA claim pending the resolution of the arbitration.
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LAW AND MOTION HEARING PROCEDURES
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Case Name: Zhou v. Cisco Systems, Inc.
Case No.: 22CV396821
INTRODUCTION
This is a putative class and Private Attorneys General Act (“PAGA”) action. Plaintiff Anna Zhou (“Plaintiff”) alleges that Defendant Cisco Systems, Inc. (“Defendant”), failed to provide employees with compliant meal and rest breaks, failed to pay minimum and overtime wages, issued noncompliant wage statements, and committed other wage and hour violations.
Now before the Court is Plaintiff’s motion for preliminary approval of a settlement, which is unopposed. As discussed below, the Court is inclined to grant preliminary approval, but the Court requests that, at the hearing on this matter, class counsel inform the Court regarding why the notice will not be translated into languages other than English. Additionally, the Court requests that certain changes be made to the notice.
BACKGROUND
Plaintiff was employed by Defendant as an hourly, non-exempt employee. (First Amended Class Action Complaint (“FAC”), ¶¶ 8, 14.) According to Plaintiff, Defendant failed to pay employees for all hours worked and failed to provide them with meal periods and permit rest breaks. (FAC, ¶ 15.) Employees worked for Defendant more than eight hours per day or 40 hours per week but Defendant failed to pay overtime wages or even pay employees for all hours worked. (FAC, ¶ 16.) Defendant failed to provide accurate, itemized wage statements. (FAC, ¶ 21.) Defendant also did not reimburse employees for required business expenses including use of personal cell phones for business purposes and purchase of face masks. (FAC, ¶¶ 16, 19.)
Based on these allegations, Plaintiff asserts, in the operative First Amended Complaint, putative class claims for: (1) failure to pay minimum wages, in violation of Labor Code sections 204, 1194, 1194.2, and 1197; (2) failure to pay overtime wages, in violation of Labor Code sections 1194 and 1198; (3) failure to provide meal periods, in violation of Labor Code sections 226.7 and 512, subdivision (a); (4) failure to permit rest breaks, in violation of Labor Code section 226.7; (5) failure to reimburse employees for required expenses under Labor Code sections 2800 and 2802; (6) failure to timely provide final wages under Labor Code sections 201 through 203; (7) violation of Labor Code section 226 by failing to provide accurate itemized wage statements; (8) violation of Business and Professions Code section 17200, et seq.; and (9) representative claim for PAGA penalties (Lab. Code, § 2698, et seq.).
DISCUSSION
I. Legal Standards for Settlement Approval
A. Class Action
Generally, “questions whether a (class action) settlement was fair and reasonable, whether notice to the class was adequate, whether certification of the class was proper, and whether the attorney fee award was proper are matters addressed to the trial court’s broad discretion.” (Wershba v. Apple Computer, Inc. (2001) 91 Cal.App.4th 224, 234–235 (Wershba), disapproved of on other grounds by Hernandez v. Restoration Hardware, Inc. (2018) 4 Cal.5th 260.)
In determining whether a class settlement is fair, adequate and reasonable, the trial court should consider relevant factors, such as the strength of the 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 the class members to the proposed settlement. (Wershba, supra, 91 Cal.App.4th at pp. 244-245, internal citations and quotations omitted.)
In general, the most important factor is the strength of the plaintiffs’ case on the merits, balanced against the amount offered in settlement. (See Kullar v. Foot Locker Retail, Inc. (2008) 168 Cal.App.4th 116, 130 (Kullar).) But the trial court is free to engage in a balancing and weighing of relevant factors, depending on the circumstances of each case. (Wershba, supra, 91 Cal.App.4th at p. 245.) The trial court must examine the “proposed settlement agreement to the extent necessary to reach a reasoned judgment that the agreement is not the product of fraud or overreaching by, or collusion between, the negotiating parties, and that the settlement, taken as a whole, is fair, reasonable and adequate to all concerned.” (Ibid., citation and internal quotation marks omitted.) The trial court also must independently confirm that “the consideration being received for the release of the class members’ claims is reasonable in light of the strengths and weaknesses of the claims and the risks of the particular litigation.” (Kullar, supra, 168 Cal.App.4th at p. 129.) Of course, before performing its analysis the trial court must be “provided with basic information about the nature and magnitude of the claims in question and the basis for concluding that the consideration being paid for the release of those claims represents a reasonable compromise.” (Id. at pp. 130, 133.)
B. PAGA
Labor Code section 2699, subdivision (l)(2) provides that “(t)he superior court shall review and approve any settlement of any civil action filed pursuant to” PAGA. The court’s review “ensur(es) that any negotiated resolution is fair to those affected.” (Williams v. Superior Court (2017) 3 Cal.5th 531, 549.) Seventy-five percent of any penalties recovered under PAGA go to the Labor and Workforce Development Agency (“LWDA”), leaving the remaining twenty-five percent for the aggrieved employees. (Iskanian v. CLS Transportation Los Angeles, LLC (2014) 59 Cal.4th 348, 380, overruled on other grounds by Viking River Cruises, Inc. v. Moriana (2022) ___U.S.___, 2022 U.S. LEXIS 2940.)
Similar to its review of class action settlements, the Court must “determine independently whether a PAGA settlement is fair and reasonable,” to protect “the interests of the public and the LWDA in the enforcement of state labor laws.” (Moniz v. Adecco USA, Inc. (2021) 72 Cal.App.5th 56, 76-77.) It must make this assessment “in view of PAGA’s purposes to remediate present labor law violations, deter future ones, and to maximize enforcement of state labor laws.” (Id. at p. 77; see also Haralson v. U.S. Aviation Servs. Corp. (N.D. Cal. 2019) 383 F. Supp. 3d 959, 971 (“when a PAGA claim is settled, the relief provided for under the PAGA (should) be genuine and meaningful, consistent with the underlying purpose of the statute to benefit the public ….”), quoting LWDA guidance discussed in O’Connor v. Uber Technologies, Inc. (N.D. Cal. 2016) 201 F.Supp.3d 1110 (O’Connor).)
The settlement must be reasonable in light of the potential verdict value. (See O’Connor, supra, 201 F.Supp.3d at p. 1135 (rejecting settlement of less than one percent of the potential verdict).) But a permissible settlement may be substantially discounted, given that courts often exercise their discretion to award PAGA penalties below the statutory maximum even where a claim succeeds at trial. (See Viceral v. Mistras Group, Inc. (N.D. Cal., Oct. 11, 2016, No. 15-CV-02198-EMC) (2016 WL 5907869, at *8-9).)
II. Settlement Process
According to Plaintiff’s counsel, the parties engaged in significant informal discovery prior to mediation. Defendant produced, inter alia, timekeeping and payroll data, relevant policies and procedures, and information regarding potential class members including their average rate of pay, shift duration, and reimbursement for any business expenses.
On February 15, 2023, the parties attended an all-day mediation session with David A. Rotman, an experienced wage and hour class action mediator. After negotiations with his assistance, they were able to reach the agreement now before the Court.
III. Settlement Provisions
The non-reversionary gross settlement amount is $1,925,000. Attorney fees of up to $641,666.67, or one third of the gross settlement, whichever is greater; litigation costs of up to $25,000; and up to $35,000 in administration costs will be paid from the gross settlement. One hundred thousand dollars of the gross settlement amount will be allocated to PAGA penalties, 75 percent of which ($75,000) will be paid to the LWDA, leaving 25 percent ($25,000) for the aggrieved employees. The named plaintiff will seek an incentive award of $10,000.
The net settlement amount of approximately $1,140,333.33 will be allocated to the approximately 5,865 class members proportionally based on their pay periods worked during the class period.[7] The PAGA payment will be allocated to aggrieved employees on a pro rata basis based on their number of pay periods worked from March 29, 2021 to the date the Court grants preliminary approval. Plaintiff’s counsel calculates that the average payment will be around $194.34 to each of the 5,865 class members. Class members will not be required to submit a claim to receive their payments but instead may opt out if they wish. For tax purposes, settlement payments will be allocated one third to wages and two thirds to penalties and interest. PAGA settlement payments will be allocated 100 percent to penalties. The employer’s share of payroll taxes will be paid in addition to the gross settlement. Funds associated with checks uncashed after 180 days will be paid to the California Controller’s Unclaimed Property Fund in the name of the class member, leaving no unpaid residue subject to the requirements of Code of Civil Procedure Section 384, subdivision (b).
In exchange for the settlement, class members who do not opt out will release “any and all known and unknown claims against Cisco and the Released Parties that are asserted in the First Amended Complaint or arise out of or reasonably relate to the facts alleged in the First Amended Complaint that, from April 5, 2018 through the date on which the Superior Court grants preliminary approval of the Settlement . . . (that) Cisco failed to pay all wages due, including minimum wages and overtime; provide meal and rest periods; pay meal and rest period premiums at the regular rate of pay; maintain accurate records; furnish accurate itemized wage statements; reimburse necessary business expenses; timely pay all wages due during employment; or pay all wages due to discharged and quitting employees.” The release is appropriately tailored to the factual allegations at issue. (See Amaro v. Anaheim Arena Management, LLC (2021) 69 Cal.App.5th 521, 537.) And, the PAGA release is appropriately limited to “any and all claims under PAGA for civil penalties against Cisco and the other Released Parties that arise out of or reasonably relate to the allegations in the notice submitted by Plaintiff to the LWDA pursuant to PAGA that, from March 29, 2021 through the date on which the Superior Court grants preliminary approval of the Settlement . . . (that) Cisco failed to pay all wages due, including minimum wages and overtime; provide meal and rest periods; pay meal and rest period premiums at the regular rate of pay; maintain accurate records; furnish accurate itemized wage statements; reimburse for necessary business expenses; timely pay all wages due during employment; or pay all wages due to discharged and quitting employees(.)” Consistent with the statute, aggrieved employees will not be able to opt out of the PAGA portion of the settlement.
IV. Fairness of Settlement
Defendant asserted various defenses, denying all liability for each claim and articulating that it fully complied with all employment law and that all wages were appropriately paid. Defendant also maintains that class certification is inappropriate and that Plaintiff is unable to perform as class representative because she signed an arbitration agreement.
Based on the records provided by Defendant, class counsel determined that the maximum potential risk-adjusted damages for the class claims would be $2,675,363.43. Plaintiff calculated the total maximum recovery for off the clock work to be $4,425,953.28 and the risk adjusted amount to be $110,648.83. Maximum potential damages for failure to properly calculate employees’ regular rate of pay were estimated to be $393,859; the risk adjusted estimate was $98,464.75. The maximum potential exposure for the meal period claim was $2,108,824.60 with risk adjusted exposure calculated to be $21,088.25. Plaintiff’s counsel estimated maximum damages for the unreimbursed business expenses claim to be $480,782.50 with risk adjusted damages at $30,048.91. Maximum risk-adjusted penalties for wage statement and Labor Code section 203 violations were estimated to be $159,410.00 and $778,548.40. PAGA penalties were calculated as having a maximum exposure of $6,517,500, but a risk adjusted value of $1,303,500.
In light of the issues surrounding class certification and the uncertainty of success at trial, the settlement achieves a good result for the class. The PAGA settlement amount of $100,000 is significant, comprising about five percent of the total settlement amount.
For purposes of preliminary approval, the Court finds that the settlement is fair and reasonable to the class, and the PAGA allocation is genuine, meaningful, and reasonable in light of the statute’s purposes. Of course, the Court retains an independent right and responsibility to review the requested attorney fees and award only so much as it determines to be reasonable. (See Garabedian v. Los Angeles Cellular Telephone Co. (2004) 118 Cal.App.4th 123, 127–128.) Counsel shall provide lodestar information prior to the final approval hearing in this matter so the Court can compare the lodestar information with the requested fees. (See Laffitte v. Robert Half Intern. Inc. (2016) 1 Cal.5th 480, 504 (trial courts have discretion to double-check the reasonableness of a percentage fee through a lodestar calculation).)
V. Proposed Settlement Class
Plaintiff requests that the following settlement class be provisionally certified: “(A)ll current and former employees who worked for Cisco in a non-exempt position in California at any time from April 5, 2018 through February 15, 2023.”
The PAGA Group is defined as “all Class Members who worked for Cisco in a non-exempt position in California at any time from March 29, 2021 through February 15, 2023.”
A. Legal Standard for Certifying a Class for Settlement Purposes
Rule 3.769(d) of the California Rules of Court states that “(t)he court may make an order approving or denying certification of a provisional settlement class after (a) preliminary settlement hearing.” Code of Civil Procedure section 382 authorizes certification of a class “when the question is one of a common or general interest, of many persons, or when the parties are numerous, and it is impracticable to bring them all before the court ….”
Code of Civil Procedure section 382 requires the plaintiff to demonstrate by a preponderance of the evidence: (1) an ascertainable class and (2) a well-defined community of interest among the class members. (Sav-On Drug Stores, Inc. v. Superior Court (2004) 34 Cal.4th 319, 326, 332 (Sav-On Drug Stores).) “Other relevant considerations include the probability that each class member will come forward ultimately to prove his or her separate claim to a portion of the total recovery and whether the class approach would actually serve to deter and redress alleged wrongdoing.” (Linder v. Thrifty Oil Co. (2000) 23 Cal.4th 429, 435.) The plaintiff has the burden of establishing that class treatment will yield “substantial benefits” to both “the litigants and to the court.” (Blue Chip Stamps v. Superior Court (1976) 18 Cal.3d 381, 385.)
In the settlement context, “the court’s evaluation of the certification issues is somewhat different from its consideration of certification issues when the class action has not yet settled.” (Luckey v. Superior Court (2014) 228 Cal.App.4th 81, 93.) As no trial is anticipated in the settlement-only context, the case management issues inherent in the ascertainable class determination need not be confronted, and the court’s review is more lenient in this respect. (Id. at pp. 93–94.) But considerations designed to protect absentees by blocking unwarranted or overbroad class definitions require heightened scrutiny in the settlement-only class context, since the court will lack the usual opportunity to adjust the class as proceedings unfold. (Id. at p. 94.)
B. Ascertainable Class
A class is ascertainable “when it is defined in terms of objective characteristics and common transactional facts that make the ultimate identification of class members possible when that identification becomes necessary.” (Noel v. Thrifty Payless, Inc. (2019) 7 Cal.5th 955, 980 (Noel).) A class definition satisfying these requirements “puts members of the class on notice that their rights may be adjudicated in the proceeding, so they must decide whether to intervene, opt out, or do nothing and live with the consequences. (Citation.) This kind of class definition also advances due process by supplying a concrete basis for determining who will and will not be bound by (or benefit from) any judgment.” (Ibid.)
“As a rule, a representative plaintiff in a class action need not introduce evidence establishing how notice of the action will be communicated to individual class members in order to show an ascertainable class.” (Noel, supra, 7 Cal.5th at p. 984.) Still, it has long been held that “(c)lass members are ‘ascertainable’ where they may be readily identified … by reference to official records.” (Rose v. City of Hayward (1981) 126 Cal. App. 3d 926, 932, disapproved of on another ground by Noel, supra, 7 Cal.5th 955; see also Cohen v. DIRECTV, Inc. (2009) 178 Cal.App.4th 966, 975-976 (“The defined class of all HD Package subscribers is precise, with objective characteristics and transactional parameters, and can be determined by DIRECTV’s own account records. No more is needed.”).)
Here, the estimated 5,865 class members are readily identifiable based on Defendant’s employment and payroll records, and the settlement class is defined based on objective characteristics. The Court finds that the settlement class is numerous, ascertainable, and appropriately defined.
C. Community of Interest
The “community-of-interest” requirement encompasses three factors: (1) predominant questions of law or fact, (2) class representatives with claims or defenses typical of the class, and (3) class representatives who can adequately represent the class. (Sav-On Drug Stores, supra, 34 Cal.4th at pp. 326, 332.)
For the first community of interest factor, “(i)n order to determine whether common questions of fact predominate the trial court must examine the issues framed by the pleadings and the law applicable to the causes of action alleged.” (Hicks v. Kaufman & Broad Home Corp. (2001) 89 Cal.App.4th 908, 916 (Hicks).) The court must also examine evidence of any conflict of interest among the proposed class members. (See J.P. Morgan & Co., Inc. v. Superior Court (2003) 113 Cal.App.4th 195, 215.) The ultimate question is whether the issues which may be jointly tried, when compared with those requiring separate adjudication, are so numerous or substantial that the maintenance of a class action would be good for the judicial process and to the litigants. (Lockheed Martin Corp. v. Superior Court (2003) 29 Cal.4th 1096, 1104-1105 (Lockheed Martin).) “As a general rule if the defendant’s liability can be determined by facts common to all members of the class, a class will be certified even if the members must individually prove their damages.” (Hicks, supra, 89 Cal.App.4th at p. 916.)
Here, it appears that common legal and factual issues predominate. Plaintiff’s claims arise from Defendant’s wage and hour practices, which would apply to the other class members, who are similarly-situated.
As to the second factor,
The typicality requirement is meant to ensure that the class representative is able to adequately represent the class and focus on common issues. It is only when a defense unique to the class representative will be a major focus of the litigation, or when the class representative’s interests are antagonistic to or in conflict with the objectives of those she purports to represent that denial of class certification is appropriate. But even then, the court should determine if it would be feasible to divide the class into subclasses to eliminate the conflict and allow the class action to be maintained.
(Medrazo v. Honda of North Hollywood (2008) 166 Cal. App. 4th 89, 99, internal citations, brackets, and quotation marks omitted.)
Like other members of the class, Plaintiff was employed by Defendant as a non-exempt employee and she alleges that she suffered the violations at issue. The anticipated defenses are not unique to Plaintiff as they are based on Defendant’s compliance with applicable labor laws and its own policies and procedures and whether it properly calculated wages. There is no indication before the Court that Plaintiff’s interests are otherwise in conflict with those of the class. The Court finds that Plaintiff has sufficiently demonstrated typicality.
Finally, adequacy of representation “depends on whether the plaintiff’s attorney is qualified to conduct the proposed litigation and the plaintiff’s interests are not antagonistic to the interests of the class.” (McGhee v. Bank of America (1976) 60 Cal.App.3d 442, 450.) The class representative does not necessarily have to incur all of the damages suffered by each different class member in order to provide adequate representation to the class. (Wershba, supra, 91 Cal.App.4th at p. 238.) “Differences in individual class members’ proof of damages (are) not fatal to class certification. Only a conflict that goes to the very subject matter of the litigation will defeat a party’s claim of representative status.” (Ibid., internal citations and quotation marks omitted.)
Here, Plaintiff would appear to have the same interest in maintaining this action as any other class member would have. Plaintiff is represented by experienced counsel who are qualified to represent the class. The Court finds that Plaintiff and her counsel are adequate to represent the class.
D. Substantial Benefits of Class Certification
“(A) class action should not be certified unless substantial benefits accrue both to litigants and the courts. . . .” (Basurco v. 21st Century Ins. (2003) 108 Cal.App.4th 110, 120, internal quotation marks omitted.) The question is whether a class action would be superior to individual lawsuits. (Ibid.) “Thus, even if questions of law or fact predominate, the lack of superiority provides an alternative ground to deny class certification.” (Ibid.) Generally, “a class action is proper where it provides small claimants with a method of obtaining redress and when numerous parties suffer injury of insufficient size to warrant individual action.” (Id. at pp. 120–121, internal quotation marks omitted.)
Here, the class is large, comprised of an estimated 5,865 class members. It would surely be inefficient for the Court to hear and decide the same issues separately and repeatedly for each class member. Further, it would be cost prohibitive for each class member to file suit individually, as each member would have the potential for little to no monetary recovery. It is clear that a class action provides substantial benefits to both the litigants and the Court in this case.
VI. Notice
The content of a class notice is subject to court approval. (Cal. Rules of Court, rule 3.769(f).) “The notice must contain an explanation of the proposed settlement and procedures for class members to follow in filing written objections to it and in arranging to appear at the settlement hearing and state any objections to the proposed settlement.” (Ibid.) In determining the manner of the notice, the court must consider: “(1) The interests of the class; (2) The type of relief requested; (3) The stake of the individual class members; (4) The cost of notifying class members; (5) The resources of the parties; (6) The possible prejudice to class members who do not receive notice; and (7) The res judicata effect on class members.” (Cal. Rules of Court, rule 3.766(e).)
Here, the notice describes the lawsuit, explains the settlement, and instructs class members that they may opt out of the settlement (except the PAGA component) or object. The gross settlement amount and estimated deductions are provided. The notice describes how class members will be informed of their qualifying pay periods as reflected in Defendant’s records and are instructed how to dispute this information. They are given 45 days to request exclusion from the class or submit a written objection to the settlement.[8]
The court requests that the notice be modified such that class members are instructed that they may appear at the final fairness hearing to make an oral objection without submitting a written objection.
The court notes that Plaintiff does not indicate whether the notice will be provided in any languages other than English and whether such translation would be reasonably necessary for the class members to understand the notice. The Court requests that class counsel be prepared to discuss, at the hearing on this matter, whether notice should be provided in languages other than English and why or why not.
The form of notice is generally adequate, but must be modified to instruct class members that they may opt out of or object to the settlement simply by providing their name, without the need to provide their phone number or other personal information.
With regard to appearances at the final fairness hearing, the notice shall be further modified to instruct class members as follows:
The judge overseeing this case encourages remote appearances. (As of August 15, 2022, the Court’s remote platform is Microsoft Teams.) Class members who wish to appear remotely should contact class counsel at least three days before the hearing if possible. Instructions for appearing remotely are provided at
and should be reviewed in advance. Class members may appear remotely using the Microsoft Teams link for Department 1 (Afternoon Session) or by calling the toll free conference call number for Department 1. Any class member who wishes to appear in person should check in at Court Services (1st floor, Downtown Superior Courthouse, 191 N. 1st St., San Jose) and wait for a sheriff’s deputy to escort him or her to the courtroom for the hearing.
Turning to the notice procedure, the parties have selected IYLM Group, Inc. as the settlement administrator. Defendant will provide a list of class members to the administrator within 30 days of the date of preliminary approval of the settlement. After updating the addresses with the National Change of Address Database, the administrator will mail the notice to class members within 15 days of receipt of the class list. The deadline for responses will be 45 days after mailing. Any returned notices will be re-mailed to any forwarding address provided or better address located using skip tracing. Class members who receive a re-mailed notice will have an additional 14 days to respond.
The notice procedures are appropriate and are approved.
CONCLUSION
The Court anticipates granting preliminary approval but it requests that Plaintiff’s counsel be prepared to explain to the Court why the notice will not be translated into languages other than English. The Court also requests that Plaintiff make the changes to the class notice identified above.
If Plaintiff’s motion for preliminary approval is ultimately granted, the final approval hearing shall take place on February 15, 2024 at 1:30 p.m. in Dept. 1.
Before final approval, Counsel shall submit lodestar information prior to the final approval hearing in this matter so the Court can compare the lodestar information with the requested fees.
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LAW AND MOTION HEARING PROCEDURES
Parties may appear in person or remotely. Remote appearances must be made through Microsoft Teams, unless otherwise arranged with the Court. Please go to to find the appropriate link.
State and local rules prohibit recording of court proceedings without a court order. These rules apply while in court and also while participating or listening in a hearing remotely. No court order has been issued which would allow recording of any portion of this motion calendar.
The Court does not provide court reporters for proceedings in the complex civil litigation departments. Any party wishing to retain a court reporter to report a hearing may do so in compliance with this Court’s October 13, 2020 Policy Regarding Privately Retained Court Reporters. The court reporter can either be in person or appear remotely.
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Calendar Line 5
Case Name: Allen Johnson v. FS Palo Alto Employment Inc. et.al.
Case No.: 22CV405334
INTRODUCTION
Plaintiff, Allen Johnson, brings claims under the Private Attorneys General Act (“PAGA”) against FS Palo Alto Employment, Inc. alleging that Defendant failed to pay employees for time spent undergoing COVID temperature checks, failed to provide off-duty meal and rest periods, and committed other wage and hour violations.
During informal discovery and prior to mediation, Defendant produced payroll data and documents estimating 104 aggrieved employees and 1074 payroll periods (8/30/2020 – 6/17/22) to be at issue. No formal discovery was conducted and subsequently, the Parties entered into a Joint PAGA Settlement Agreement that was approved on March 3, 2023.
Pursuant to the agreement, Defendant was required to pay a Gross Settlement Amount of $95,000.00, one-third of which was allocated for Counsel Fees. Given that the Parties were uncertain about the exact number of aggrieved employees and the pay periods at issue, they opted to include an “Escalator Clause” in the settlement agreement. This clause allows the gross settlement amount to be proportionally increased should the actual number of payroll periods worked by the Aggrieved Employees prove to be higher than the estimated 1,074 + 10%.
Relevant information and payroll data was subsequently sent to a third-party administrator, who discovered that the PAGA period encompassed 4903 payroll periods and not 1074. Defendant has now amended this number to 3224 periods; an increase that has triggered the “Escalator Clause” of the settlement agreement. Accordingly, Plaintiff has asked Defendant to pay an additional sum of $164,120.36 and Defendant has refused.
Now before the court is Plaintiff’s motion seeking an order requiring Defendant to comply with the settlement agreement and the Court’s subsequent Order and Judgement. Defendant has filed its opposition seeking to rescind the settlement agreement based on its unilateral mistake of fact surrounding the tabulated pay periods.
As explained below, the Court GRANTS Plaintiff’s motion and thus ORDERS Defendant to pay an additional amount of $164,120.36 in compliance with the terms of the settlement agreement and the Court’s Order and Judgement.
LEGAL STANDARD
A. Jurisdiction
Pursuant to Civil Procedure Section 664.6 and the Parties’ written settlement agreement, this Court retained jurisdiction to enforce the terms of the PAGA settlement agreement and the final Order and Judgement. Since neither Party is disputing or challenging the continued jurisdiction, the Court finds no need to further address this topic.
B. Legally Enforceable PAGA Settlement Agreement
Under California law, contract formation requires (1) parties capable of contracting; (2) the parties’ consent; (3) a lawful object; and (4) sufficient cause or consideration. (Lopez v. Charles Schwab & Co., 118 Cal.App.4th 1224, 1230, 13 Cal.Rptr.3d 544 (2004) (citing Cal. Civ. Code §1550))
It is undisputed that the parties formed a legally enforceable settlement agreement. Defendant has now raised the issue that its consent was obtained as the result of a factual mistake and is therefore seeking to rescind the settlement agreement. Since the facts of this case do not bring into question the issues of capacity, lawfulness, or the sufficiency of consideration, this Court will focus squarely on Defendant’s consent and unilateral mistake.
C. Unilateral Mistake of Fact
It is noted that Defendant has not filed a motion to rescind the settlement agreement and to vacate the judgment. Instead, they have opted to raise “rescission by mistake” as a defense against Plaintiff’s demand for their contractual performance.
In California, rescission by mistake is governed by statute. California Civil Code §1689(b)(1) states in part that a "party to a contract may rescind the contract . . . (i)f the consent of the party rescinding, or of any party jointly contracting with him, was given by mistake." (Cal. Civ. Code § 1689(b)(1)). A mistake of fact is not "the neglect of a legal duty on the part of a person making the mistake," but consists of "(a)n unconscious ignorance or forgetfulness of a fact past or present, material to the contract" or "(b)elief in the present existence of a thing material to the contract, which does not exist, or in the past existence of such a thing, which has not existed." (Cal. Civ. Code § 1577) A party seeking rescission must also show "that it would suffer material harm if the agreement were enforced, though that need not be a pecuniary loss." (Habitat Trust for Wildlife, Inc. v. City of Rancho Cucamonga, 175 Cal. App. 4th 1306, 1332-33, 2009).)
A factual mistake by one party, or unilateral mistake, provides grounds for rescission in certain limited circumstances. The California Supreme Court in Donovan v. RRL Corp. (2001) 26 Cal.4th 261, 281 (Donovan).) Where a plaintiff has no reason to know of and did not cause the defendant’s unilateral mistake of fact, the defendant must establish the following to obtain rescission of the contract:
1. The defendant made a mistake regarding a “basic assumption” upon which the defendant made the contract;
2. the mistake has a material effect upon the agreed exchange of performances that is adverse to the defendant;
3. the defendant does not bear the risk of the mistake; and
4. the effect of the mistake is such that enforcement of the contract would be unconscionable.
(Donovan, supra, 26 Cal. 4th at p. 282.)
DISCUSSION
Both parties utilize the holding of Donovan as the foundation for their arguments. The Court, having considered all arguments and supporting documents, evaluates each factor as follows:
A. Mistake Regarding a Basic Assumption
Defendant contends that the number of 104 aggrieved employees working 1074 payroll periods from August 2020 to June 2022 was the basic assumption upon which the settlement agreement was formed. Defendant states that its attorney inadvertently communicated that this data was current as of June 2022, when in fact the information was current as of November 2021. (See Declaration of Diana Lerma.) Defendant’s counsel was unaware of this mistake until after the settlement agreement was approved and the matter was submitted to a third-party administrator.
Defendant argues that this error is similar to clerical and construction bidding errors used to rescind contracts under Restatement (Second) of Contracts §153 and cites to number of out-of-state cases for support. This Court is bound by decisions and opinions issued by the California courts of appeals and the California Supreme Court. Therefore, it will not give much weight to out-of-state cases and opinions Defendant has used to support its opposition.
Nevertheless, at the core of Defendant’s argument and the parties’ discord lies the language and the application of the “Escalator Clause”, which is titled AGGRIEVED EMPLOYEE SIZE ESTIMATES AND ESCALATOR CLAUSE and provides:
“The Gross Settlement Amount is premised on (their) being 104 Aggrieved Employees who worked a total of 1074 pay Periods between August 30, 2020, and June 17, 2022. Should the actual number of Pay Periods worked by the Aggrieved Employees exceed 1,182 (i.e. 10% over 1,074) the Gross Settlement Amount will increase in proportion to the overage. For instance, a 12% increase in the Pay Periods will result in a 2% increase in the Gross Settlement Amount.” (PAGA Settlement Agreement and Release of Claims p.12, section 8.)
In evaluating and interpreting the terms of the parties’ settlement agreement, the Court’s primary goal is to give effect to the mutual intention of the parties. (Bank of the West v. Superior Court, 2 Cal. 4th 1254, 1264, 10 Cal. Rptr. 2d 538, 833 P.2d 545 (1992).) The parties' mutual intent is determined by examining a number of factors, including: (1) the words used in the written agreement; (2) the surrounding circumstances under which the parties negotiated or entered into the contract; and (3) the subsequent conduct of the parties. (Morey v. Vannucci, 64 Cal. App. 4th 904, 912 (1998); Hernandez v. Badger Construction Equipment Co., 28 Cal. App. 4th 1791, 1814 (1994).)
The Court has examined the circumstances surrounding the parties’ negotiations, wording of the settlement agreement and particularly the “Escalator Clause.” Agreeing with Defendant’s argument, the Court concludes that the settlement agreement was principally premised on 104 aggrieved employees working 1074 payroll periods from August 2020 to June 2022. Therefore, a mistake in the accuracy of this information, i.e., the payroll periods, is a mistake regarding a basic assumption upon which the defendant executed the settlement agreement. Defendant satisfies the first element of Donovan.
B. Material Effect of the Mistake
Defendant argues that the increased payroll periods have practically tripled the Gross Settlement Amount; a value and an amount that was unplanned and unanticipated. The original settlement amount, based on erroneous data, was $95,000.00. The proportionally increased settlement amount, based on corrected data, is $164,120.36. Plaintiff does not oppose that this monetary increase is somewhat substantial and materially affects Defendant’s financial obligation. However, Plaintiff has argued that the practical effect of this increase is not adverse to the Defendant. We address Plaintiff’s argument in our discussion about conscionability of enforcement.
For the purposes of this section, the Court agrees with Defendant that the settlement amount has now substantially increased, which materially affects Defendant’s financial obligation.
C. Defendant Bears the Risk of Mistake
Plaintiff asserts that Defendants provided the initial and subsequent payroll data and hence assumed the risk for providing inaccurate information. Additionally, Plaintiff highlights that the settlement agreement explicitly assigned the risk of mistake to Defendant through its “Escalated Clause.”
Defendant argues that it was assumed by all involved that the relied upon payroll data was relatively accurate, give or take a few employees or pay periods. Defendant adds that the purpose of the Escalator Clause’ was to compensate for minor differences, in the estimated range of 10% to 12%. Accordingly, Defendant did not bear the risk of a 300% increase. (Opposition p.6, lines 3-6) Defendant, however, has failed to provide any admissible evidence supporting its claim that the Escalator Clause had the limited purpose of compensating for minor differences.
California has adopted and applies the Restatement (Second) of Contracts §154 to determine the allocation of risk in instances of mistake. Donovan, 26 Cal. 4th at 283. Section 154 provides that a party bears the risk of mistake when:
(a) the risk is allocated to him by agreement of the parties, or
(b) he is aware, at the time the contract is made, that he has only limited knowledge with respect to the facts to which the mistake relates but treats his limited knowledge as sufficient, or
(c) the risk is allocated to him by the court on ground that it is reasonable in the circumstances to do so.
The Court once again delves into its evaluation and interpretation of the terms of the settlement agreement, particularly the “Escalator Clause,” as follows:
1. The “Escalator Clause” was included in recognition that precise payroll details had not yet been determined. This has been further acknowledged by Defendant in its opposition (Opposition p. 2, lines 24-26)
2. The title of the provision demonstrates that the Aggrieved Employee size is merely estimated and therefore the correct number could be less or more.
3. The parties anticipated that the actual and correct number of pay periods could in fact exceed 1182 and thus agreed that the Gross Settlement Amount would then increase proportionally.
4. The “Escalator Clause” lacks any language capping or limiting any increase in pay periods, and/or any increase in the settlement amount. This negates Defendant’s argument that the purpose of this provision was limited to minor differences.
It is evident to the Court that Defendant was clearly uncertain about the number of aggrieved employees and payroll periods that were at issue when it entered into the settlement agreement. Yet, Defendant felt his knowledge and the 10% cushion provided in the Escalator Clause would be sufficient. The Court concludes that the very inclusion of the “Escalator Clause” was indeed an agreement by the parties to allocate to Defendant any risk of mistake in its payroll data.
D. Mistake Makes Enforcement of the Settlement Agreement Unconscionable
The final factor Defendant must establish to obtain rescission based upon mistake is to demonstrate that enforcement of the Settlement Agreement would be unconscionable.
"An unconscionable contract ordinarily involves both a procedural and substantive element: (1) oppression or surprise, and (2) overly harsh or one-sided results." (Donovan, 26 Cal. 4th at 291 (citing Armendariz v. Foundation Health Psychcare Servs., Inc. 24 Cal. 4th 83, 114, 99 Cal. Rptr. 2d 745, 6 P.3d 669 (2000).) "Oppression" arises from an inequality of bargaining power which results in no real negotiations and "an absence of meaningful choice.” "Surprise" involves the extent to which the supposedly agreed-upon terms of the bargain are hidden in the prolix printed form drafted by the party seeking to enforce the disputed terms." (Stirlen v. Supercuts, Inc., 51 Cal. App. 4th 1519, 1532, 60 Cal. Rptr. 2d 138 (1997) (quoting A&M Produce Co. v. FMC Corp., 135 Cal. App. 3d 473, 486, 186 Cal. Rptr. 114 (1982)) With respect to the procedural prong, this Court finds there was no oppression or surprise due to unequal bargaining power.
As to the substantive prong, courts assess whether a unilateral mistake leads to "overly harsh or one-sided results entitling (the mistaken party) to rescission." (Donovan, 26 Cal. 4th at 292) Because a contract is “largely an allocation of risks between the parties,” a contract term is “substantively suspect if, viewed at the time the contract was formed, it allocates the risks in an unreasonable or unexpected manner.” (Zullo v. Superior Court, 197 Cal.App.4th 477, 484, 127 Cal.Rpts.3d 461 (2011)) California courts typically find substantive unconscionability in the context of mistaken advertisements or construction bids where it would be "unjust and unfair to permit (one party) to take advantage of (the other party's) mistake." (Kemper, 37 Cal. 2d at 702-03.) The facts of this case are not analogous to the cases involving mistaken advertisements or construction bids.
This Court rejects the notion that the “Escalator Clause” allocates the risk to the Defendant in an unexpected manner. Essentially, the Parties agreed that Defendant would pay more if the count for pay period proves to be higher than what was estimated at the time. What seems to have been unexpected to Defendants is the amount of increase in payment and not the actual risk of payment. This is tantamount to a buyer’s remorse and not a mistake of facts.
Furthermore, the Court finds that the results here are not a windfall to the Plaintiff and will not be one-sided or overly harsh to the Defendant. In exchange for additional settlement funds, Defendant stands to obtain a broader release that covers more pay periods than it contemplated at the time of the agreement and will further benefit from paying for the extra pay periods at the same rate it would have paid for the 1074 wage statements.
In summation, the Court concludes that Defendant has only fulfilled two out of four elements of the “Donovan test” and has thus failed to satisfy its burden of establishing grounds for rescission of the settlement agreement.
ATTORNEYS’ FEES
Section 3.2.1 of the Parties’ Settlement Agreement provides for a PAGA Counsel Fees Payment of not more than one-third of the Gross Settlement Amount and PAGA Counsel Litigation Expenses Payment of not more than $15,000.00.
The Court had previously found it reasonable to allocate one-third of the gross settlement amount for Counsel Fees and awarded $31,666 in requested fees. Considering that the gross settlement amount is now increased by $164,120.36, the Court also finds it reasonable to allocate one-third of this increased amount for PAGA Counsels’ Fees.
CONCLUSION
For the reasons stated above, the Court GRANTS Plaintiff’s motion and modifies its previous Order and Judgment so as to reflect the increase of $164,120.36 in the Gross Settlement Amount. The Court orders one-third of this increased settlement amount (i.e., $54,706.77) to be allocated towards Plaintiff’s Counsels’ Fees.
The Court DENIES Defendant’s request to rescind the settlement agreement.
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LAW AND MOTION HEARING PROCEDURES
Parties may appear in person or remotely. Remote appearances must be made through Microsoft Teams, unless otherwise arranged with the Court. Please go to to find the appropriate link.
State and local rules prohibit recording of court proceedings without a court order. These rules apply while in court and also while participating or listening in a hearing remotely. No court order has been issued which would allow recording of any portion of this motion calendar.
The Court does not provide court reporters for proceedings in the complex civil litigation departments. Any party wishing to retain a court reporter to report a hearing may do so in compliance with the Court’s October 13, 2020, policy Regarding privately Retained Court Reporters. The court reporter can either be in person or appear remotely.
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Calendar Line 6
Case Name: Temujin Labs, Inc., et al. v. Abittan, et al.
Case No.: 20CV372622
Case Name: Temujin Labs, Inc. v. Franklin Fu
Case No.: 21CV375422
These related actions arise from the business dealings of: (1) Temujin Labs Inc., a Delaware corporation (“Temujin”); (2) a related Cayman Islands corporation; and (3) Temujin’s co-founders, who go by the aliases of Lily Chao and Damien Ding.[9] These business dealings involve the development of Temujin as a financial technology company operating under the name “Findora.”
In Case No. 20CV372622 (“Abittan”), Temujin alleges that Defendants and Cross-Complainants Ariel Abittan, Benjamin Fisch, and Charles Lu conspired to: (a) assert a false claim of ownership of its business; (b) misappropriate its trade secrets; (c) usurp and interfere with control over its assets, such as social media accounts; and (d) interfere with its relationships with investors and business partners. Mr. Abittan, a former business partner of Ms. Chao and Mr. Ding, filed a cross-complaint alleging, among other things, that Ms. Chao and Mr. Ding stole from and defamed him. Mr. Fisch and Mr. Lu filed a separate cross-complaint, asserting that Ms. Chao and Mr. Ding misrepresented a host of important facts about their business and activities to induce Mr. Fisch and Mr. Lu to work for Temujin.
In Case No. 21CV375422 (“Fu”), Temujin alleges that its former consultant, Defendant and Cross-Complainant Franklin Fu, demanded additional under-the-table payments for himself and secret payments to certain investors rather than performing his duties in good faith. In a cross-complaint, Mr. Fu alleges that Ms. Chao and Mr. Ding repeatedly lied to him about a range of subjects, including Temujin’s technology and even their own identities.
Now before the Court are (1) a motion to compel and for monetary sanction by Mr. Abittan and (2) a motion for termination and monetary sanctions by Messrs. Fisch, Lu and Fu.[10] For the reasons discussed below, the Court GRANTS Mr. Abittan’s motion to compel and GRANTS IN PART and DENIES IN PART Messrs. Fisch, Lu and Fu’s motion for terminating and monetary sanctions.
I. ABITTAN’S MOTION TO COMPEL
Mr. Abittan moves to compel the deposition of cross-defendant Yuting Chen pursuant to Code of Civil Procedure section 2025.450 (“Section 2025.450”). This code section provides, in pertinent part, that “[i]f after service of a deposition notice, a party to the action . . . without having served a valid objection under Section 2025.410, fails to appear for examination or to proceed with it, . . . the party giving the notice may move for an order compelling the deponent’s attendance and testimony.” (Code Civ. Proc., § 2025.450, subd. (a).) If a party asserts objections based on grounds other than defects in the notice, the party must nevertheless appear for the deposition as noticed, unless the party files a motion to stay the taking of the deposition and quashing the deposition notice. (See Code Civ. Proc., § 2025.280, subd. (a) [“[t]he service of a deposition notice . . . is effective to require any deponent who is a party to the action . . . to attend and testify”].)
A party moving to compel a deponent’s attendance and testimony must establish the following in order to succeed on the motion: (1) he or she served the responding party with the deposition notice; (2) no valid objection was asserted; and (3) the deponent failed to appear. (Code Civ. Proc., § 2025.450, subd. (a).) Additionally, the motion must be accompanied by a declaration “stating that the deponent has contacted the deponent to inquire about the nonappearance.” (Code Civ. Proc., § 2025.450, subd. (b)(2).)
Here, according to the declaration of Mr. Abittan’s counsel, Brianna K. Pierce, during a prior meet and confer with Ms. Chen’s attorney, counsel relayed that her client[11] would not voluntarily sit for a limited deposition, claiming that she was not a party to the action. As a consequence of this assertion, the Court directed Ms. Chen to file a motion to quash summons and service of process and directed Mr. Abittan to file a motion to compel her deposition. On April 14, 2023, the Court issued an order on the foregoing motions, finding that Mr. Abittan was entitled to depose Ms. Chen, a cross-defendant in this action, in order to determine her identity and ascertain whether she is the person who allegedly caused the injuries he seeks to redress. However, the motion to compel was ultimately denied without prejudice such that Mr. Abittan could refile if Ms. Chen refused to attend her deposition after she was served with notice of the same.
On April 12, 2023, Ms. Chen was served with a deposition notice for May 11, 2023, a date selected based on the representation of Ms. Chen’s counsel that her client would be available to be deposed that day. Ms. Chen did not object to the deposition notice but requested an interpreter.
After Ms. Chen took various actions that indicated she would not appear at her deposition, on May 2, 2023, Mr. Abittan filed an ex parte application seeking an order compelling Ms. Chen to appear at her deposition. On May 5, 2023, the Court denied the motion, concluding that whether Ms. Chen would appear at her deposition was a matter of speculation at that point in time. The Court advised that if Ms. Chen did not ultimately appear, Mr. Abittan could seek appropriate relief.
On May 11, 2023, Ms. Chen failed to appear at her deposition and did not respond to Mr. Abittan’s counsel’s subsequent inquiry as to her absence. This motion followed and is not opposed by Ms. Chen.
Based on the foregoing, Mr. Abittan has made the requisite showing on this motion by demonstrating that: Ms. Chen was served with a deposition notice; she did not assert a valid objection to that notice; she failed to appear at her deposition; and he inquired as to her nonappearance, to no avail. Accordingly, Mr. Abittan’s motion must be granted.
In addition to an order compelling Ms. Chen to appear at her deposition, Mr. Abittan also requests that the Court impose monetary sanctions against her in the amount of $7,441.29. If a motion under subdivision (a) of Section 2025.450 is granted, the court “shall impose a monetary sanction … in favor of the party who noticed the deposition and against the deponent … unless the court finds that the one subject to the sanction acted with substantial justification or that other circumstances make the imposition of the sanction unjust.” (Code Civ. Proc., § 2025.450, subd. (g)(1).) The losing party may be ordered to pay reasonable expenses, including attorney fees, incurred by the party prevailing on the motion. (Code Civ. Proc., § 2023.030, subd. (a).) As Ms. Chen has not opposed this motion, there is no indication that she acted with substantial justification or that other circumstances make the imposition of sanctions unjust.
According to Ms. Pierce’s declaration, as a result of Ms. Chen’s non-appearance, Mr. Abittan incurred $2,329.29 in costs associated with a court reporter ($622.29), translator ($750) and travel ($622.29.) She continues that she spent 7.2 hours of time to attend the deposition and therefore, based on her hourly rate of $710, Mr. Abittan needlessly incurred $5,112 in attorney’s fees. The Court concludes that the foregoing are reasonable and therefore Mr. Abittan is entitled to an award of $7,441.29 from Ms. Chen.
In accordance with the foregoing, Mr. Abittan’s motion to compel and for monetary sanctions is GRANTED.
II. MESSRS. FISCH, LU AND FU’S MOTION FOR TERMINATION SANCTIONS
In the instant motion, Messrs. Fisch, Lu and Fu[12] request terminating sanctions against the Temujin Parties striking their Complaint and Answer to the Cross-Complaint, and entering a default in their favor on the Cross-Complaint. They further request that the Court set a prove-up hearing to allow them to set forth the amount of damages that they should be awarded as part of the default. In conjunction with the foregoing, Messrs. Fisch and Lu request that the Court permit them to present evidence supporting an award of monetary sanctions in the amount of fees incurred or charged to them relating to the Temujin Parties’ failure to turn over identity information.
Finally, in addition or in the alternative to the foregoing award of monetary sanctions at the prove-up hearing, Messrs. Fisch and Lu request that the Court order monetary sanctions of $500 per day since the Court issued its September 29, 2022 Order for the Temujin Parties’ refusal to comply, and an additional $1,5000 for each day they refused to comply with the Court’s Orders from May 30, 2023- the date of the Order for Issue and Evidence Sanctions- until the date of the granting of the instant motion.
A. Background
In Abittan, the Court lifted the initial discovery stay in a minute order entered on May 19, 2021. The parties and the Court agreed to prioritize certain “identity”-related discovery in preparation for a mediation to be completed by June 16, 2023.
Messrs. Fisch and Lu propounded written discovery requests concerning Ms. Chao and Mr. Ding’s identities. In an order filed on August 22, 2022 (“August 22 Order”), the Court granted their motions to compel further, substantive responses to those requests, concluding that there was good cause for the discovery of Ms. Chao’s and Mr. Ding’s identities and aliases.[13]
Meanwhile, disputes arose about Ms. Chao and Mr. Ding’s compliance with the August 22 Order, specifically with regard to their failure to disclose their Chinese character names. On the date set by the Court for production, instead of doing so, the Temujin Parties filed a motion to disqualify counsel and to “clarify” the August 2022 Order. In response, Mr. Fu applied ex parte for an order compelling compliance with the August 22 Order, which Mr. Fisch and Mr. Lu joined. On September 29, 2022, the Court granted the ex parte application (the “September 29 Order”), requiring the Temujin Parties to produce documents on or before October 6, 2022, and denied the Temujin Parties’ motion for clarification of the Court’s prior order. On October 6, 2022, the Temujin Parties produced only heavily redacted and illegible copies of two drivers’ licenses and emails with various aliases, and failed to produce complete records of Ms. Chao and Mr. Ding’s true identities, such as passports and other documents. No explanation was offered for the redactions, nor could a credible one be. Further, although the production contained electronic data, none of the documents were produced with any of the accompanying metadata as required by California law.
Consequently, in October 2022, Mr. Fisch and Mr. Lu were forced to file additional motions to compel further production regarding Ms. Chao and Mr. Ding’s Chinese character names. On November 21, 2022, the Court granted both motions (the “November 21 Order”). The Temujin Parties were required to make the ordered production within 10 calendar days of the filing of the Court’s order.
On December 1, 2022, the Temujin Parties produced one additional document, which is a heavily redacted and illegible version of Ms. Chao’s passport. No documents were provided showing Mr. Ding’s Chinese character name. Mr. Fisch and Mr. Lu notified the Temujin Parties of their continued failure to comply with the Court’s August 22, September 29 and November 21 Orders and stated that if this failure was not remedied by December 23, 2022, they would seek sanctions for their repeated refusal to comply.
At the January 19, 2023 case management conference, the Court expressed concerns with how long it was taking the Temujin Parties to comply with its prior orders, noted that the parties should meet and confer to try to resolve the issue once and for all, but that Mr. Fisch, Mr. Lu and Mr. Fu could file motions for sanctions if necessary. On January 27, 2023, the parties met and conferred and counsel for the Temujin Parties agreed to produce clearer versions of the identity documents and stated they would articulate what additional identity documents would be produced by the following week.
Because no additional documents were produced as promised, on May 1, 2023, Mr. Fisch and Mr. Lu filed a motion for issue and monetary sanctions, as did Mr. Fu. On May 30, 2023, the Court granted the former motion in part as to the requested issue sanctions, and denied the motion without prejudice as to the monetary sanctions. The Court similarly granted Mr. Fu’s motion in part as to issue sanctions and denied it without prejudice as to monetary sanctions. Mr. Fu had also requested terminating sanctions based on Ms. Chao and Mr. Ding’s “egregious conduct,” and while the Court denied this request, it stated that if Ms. Chao and Mr. Ding failed to produce information concerning their identities within 30 days of the Court’s order, Mr. Fu (and Messrs. Fisch and Lu) could “notice a new motion for terminating sanctions, and the Court will seriously consider it.”
Based on the Court’s May 30 Order, the deadline for production of identity documents for Ms. Chao and Mr. Ding was June 29. On June 27, the Temujin Parties filed an ex parte application to stay the May 30 Order until July 30, 2023 or, in the alternative, to permit redaction of certain “unnecessary” information, essentially a thinly disguised motion for reconsideration. The Court denied the application. June 29 came and went without any production and this motion followed.
B. Discussion
As explained in the Court’s May 30 Order, disobeying a court order is explicitly recognized as a “misuse of the discovery process.” (Code Civ. Proc., § 2023.010, subd. (g).) “The trial court has broad discretion in selecting discovery sanctions, subject to reversal only for abuse. The trial court should consider both the conduct being sanctioned and its effect on the party seeking discovery and, in choosing a sanction, should attempt[] to tailor the sanction to the harm caused by the withheld discovery. The trial court cannot impose sanctions for misuse of the discovery process as a punishment. (Doppes v. Bentley Motors, Inc. (2009) 174 Cal.App.4th 967, 992 [internal citations and quotations omitted].)
“The discovery statutes evince an incremental approach to discovery sanctions, starting with monetary sanctions and ending with the ultimate sanction of termination. ‘Discovery sanctions “should be appropriate to the dereliction, and should not exceed that which is required to protect the interests of the party entitled to but denied discovery.’ If a lesser sanction fails to curb misuse, a greater sanction is warranted: continuing misuses of the discovery process warrant incrementally harsher sanctions until the sanction is reached that will curb the abuse. ‘A decision to order terminating sanctions should not be made lightly. But where a violation is willful, preceded by a history of abuse, and the evidence shows that less severe sanctions would not produce compliance with the discovery rules, the trial court is justified in imposing the ultimate sanction.’” (Doppes, supra, 174 Cal.App.4th at 992 [internal citations and quotations omitted].)
The sanction imposed “should not exceed that which is required to protect the interests of the party entitled to but denied discovery. Where a motion to compel has previously been granted, the sanction should not operate in such a fashion as to put the prevailing party in a better position than he would have had if he had obtained the discovery sought and it had been completely favorable to his cause.” (Deyo v. Kilbourne (1978) 84 Cal.App.3d 771, 793.)
Here, given Ms. Chao and Mr. Ding’s repeated defiance of the Court’s prior orders and the failure of lesser sanctions to compel their compliance, the Court concludes that terminating sanctions are warranted and necessary. The appropriateness of this conclusion is further buttressed by the contents of a purported writ petition recently filed by the Temujin Parties in the Court of Appeal challenging many of this Court’s rulings on prior discovery motions. In this filing, Ms. Chao and Mr. Ding expressly state that they have not complied with the Court’s May 30 Order and they “do not plan to comply with it.” In the face of this unequivocal statement of intent to disobey the Court’s order, it is left with no choice but to impose the terminating sanctions requested by the moving parties. In their opposition to the instant motion, the Temujin Parties re-argue the merits of prior decisions of this Court, which is wholly inappropriate. The only question that concerns the Court at this juncture is this: have the Temujin Parties produced responsive documents as required by the May 30 Order? They have not, and do not intend to and thus sanctions must be imposed.
The Court GRANTS moving parties’ motion to the extent it seeks an order striking Ms. Chao and Mr. Ding’s Complaint and Answer to the Cross-Complaint and the entry of default for Messrs. Fisch, Lu and Fu on their Cross-Complaints. The Court also will permit Messrs. Fisch, Lu and Fu to present at the prove-up hearing for damages to be awarded as a result of the default evidence supporting an award of monetary sanctions in the amount of fees incurred by or charged to them as a result of Ms. Chao and Mr. Ding’s failure to turn over identity information. Messrs. Fisch, Lu and Fu’s additional/alternative request for monetary sanctions is DENIED.
III. CONCLUSION
Mr. Abittan’s motion to compel and for monetary sanctions is GRANTED.
Messrs. Fisch, Lu and Fu’s motion for terminating and monetary sanctions is GRANTED IN PART and DENIED IN PART.
The Court will prepare the order.
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[1] Plaintiffs initially filed a class action complaint raising no PAGA claim in docket 22CV400335. Thereafter, they filed a PAGA only action in docket 22CV401621. The cases have now been consolidated and the operative First Amended Complaint, filed May 11, 2023, raises both class and PAGA claims.
[2] The notice will provide the date by which the class members must respond.
[3] The notice will provide the date by which the class members must respond.
[4] Defendant TheKey of California, LLC, was known as Home Care Assistance of California, LLC, prior to March 2022, and is a wholly-owned subsidiary of Defendant TheKey LLC, which in turn is a wholly-owned subsidiary of TheKey Holdings, LLC. (Gunnet Decl., ¶¶ 1-2.)
[5] Concurrent with their Reply, Defendants request judicial notice of the Plaintiff’s letter to the California Labor & Workforce Development Agency as evidence that the Plaintiff’s duties involved interstate commerce. As Defendants are attempting to present new evidence with their reply papers without offering authority as to why such new evidence can be considered, the request is DENIED. (See Jay v. Mahaffey (2013) 218 Cal.App.4th 1522, 1537 (the general rule of motion practice is that new evidence is not permitted with reply papers); see also Nazir v. United Airlines, Inc. (2009) 178 Cal.App.4th 243,252 (improper to introduce new evidence in reply).)
[6] For example, Plaintiff relies upon Slaughter v. Stewart Enterprises, Inc. (N.D. Cal. 2007) 2007 U.S. Dist. LEXIS 56732 (Slaughter), a case in which the appellate court found the FAA does not apply to a crematorium worker because “federal regulation of death care business is virtually non-existent.” (Id. at *18.) Here, by contrast, Congress has expressed that the domestic service industry affects commerce such that it may be regulated. (29 U.S.C § 202, subd. (a).)
[7] In the event that the actual number of class members is more than 10 percent higher than estimated, the settlement will be increased proportionately with the number of workweeks those class members worked above the 10 percent threshold.
[8] The notice will provide the date by which the class members must respond.
[9] The Temujin entities, a related entity called Discreet Labs Ltd., Ms. Chao, and Mr. Ding are referred to collectively herein as the “Temujin Parties.”
[10] Mr. Abittan moves to join in Mr. Fisch and Mr. Lu’s motion, which the Court GRANTS in Abittan and DENIES in Fu (as he is not a party in that case).
[11] Ms. Chen was served with summons in this action via text and publication in January 2022 and February 2022, respectively, pursuant to the Court’s January 12, 2022 order allowing service through alternative means.
[12] According to the notice of motion for the matter currently before the Court, the requested relief is being sought by Messrs. Fisch and Lu. However, the beginning of the memorandum filed in support of the motion reads, “Messrs. Fu, Lu and Fisch [] each jointly move this Court in their respective cases for an Order for terminating sanctions and the relief set out in the concurrently served proposed orders.” Mr. Fu’s name is also included in the caption of the declaration of counsel filed in support of the motion. The Court presumes that Mr. Fu is intended to be one of the moving parties and that the omission of his name from the notice of motion was in error and therefore will treat him as such.
[13] Mr. Fisch and Mr. Lu specifically moved to compel further responses to Mr. Fisch’s Requests for Production of Documents (“RPD”) (Set One) Nos. 25 and 26.
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