Superior Court, State of California



DATE: SEPTEMBER 29, 2022 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 |19CV347471 |Lee v. Del Monaco Foods, Inc., et al. |See tentative ruling. The Court will prepare the|

| | | |final order. |

|LINE 2 |22CV394848 |Geraci v. HCL America, Inc. |See tentative ruling. The Court will prepare the|

| | | |final order. |

|LINE 3 |21CV378146 |Hammer v. Daylight Foods, Inc. |See tentative ruling. The Court will prepare the|

| | | |final order. |

|LINE 4 |20CV369854 |Meguro v. Silicon Valley Bank |See tentative ruling. The Court will prepare the|

| | | |final order. |

|LINE 5 |19CV355315 |Ortmann v. Adecco USA, Inc., et al. |See tentative ruling. The Court will prepare the|

| | | |final order. |

|LINE 6 |20CV367305 |Foresite Capital Management IV, L.P. v. |See tentative ruling. The Court will prepare the|

| | |Esfandyarpour, et al. |final order. |

|LINE 7 | | | |

|LINE 8 | | | |

|LINE 9 | | | |

|LINE 10 | | | |

|LINE 11 | | | |

|LINE 12 | | | |

|LINE 13 | | | |

Calendar Line 1

Case Name: Edwardo Lee v. Del Monaco Foods, Inc., et al.

Case No.: 19CV347471

This is a putative class and Private Attorneys General Act (“PAGA”) action. Plaintiff Edwardo Lee alleges that Defendants Del Monaco Foods, Inc. and Del Monaco Specialty Foods, Inc. (collectively “Del Monaco”) failed to provide compliant meal and rest breaks, failed to pay employees for this and other off-the-clock work, failed to properly calculate employees’ pay rates for overtime purposes, and committed other wage and hour violations.

The parties reached a settlement, which the Court preliminarily approved in an order filed on May 4, 2022. The factual and procedural background of the action and the Court’s analysis of the settlement and settlement class are set forth in that order.

Before the Court is Plaintiff’s motion for final approval of the settlement and for approval of his attorney fees, costs, and service award.  The motion is unopposed. As discussed below, the Court GRANTS final approval.

 

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 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 burden is on the proponent of the settlement to show that it is fair and reasonable.  However “a presumption of fairness exists where: (1) the settlement is reached through arm’s-length bargaining; (2) investigation and discovery are sufficient to allow counsel and the court to act intelligently; (3) counsel is experienced in similar litigation; and (4) the percentage of objectors is small.”    

 

(Wershba, supra, 91 Cal.App.4th at p. 245, citation omitted.)  The presumption does not permit the Court to “give rubber-stamp approval” to a settlement; in all cases, it must “independently and objectively analyze the evidence and circumstances before it in order to determine whether the settlement is in the best interests of those whose claims will be extinguished,” based on a sufficiently developed factual record.  (Kullar, supra, 168 Cal.App.4th at p. 130.)

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. TERMS AND ADMINISTRATION OF SETTLEMENT

The non-reversionary gross settlement amount is $700,000.  Attorney fees of up to $245,000 (thirty-five percent of the gross settlement), litigation costs not to exceed $25,000, and administration costs of approximately $15,000 will be paid from the gross settlement. $50,000 will be allocated to PAGA penalties, 75 percent of which will be paid to the LWDA. The named plaintiff will seek an incentive award of $10,000.

The net settlement will be allocated to settlement class members proportionally based on their weeks worked during the class period. Class members will not be required to submit a claim to receive their payments. For tax purposes, settlement payments will be allocated 25 percent to wages and 75 percent to penalties, interest, and other non-wage damages. The employer’s share of taxes will be paid separately from the gross settlement. Funds associated with checks uncashed after 180 days will be transmitted to the State Controller’s Office Unclaimed Property Fund, in the name of the relevant class member.

In exchange for the settlement, class members who do not opt out will release “all claims and causes of action alleged or which could have been alleged based on the factual allegations in the Complaint, including” specified relevant causes of action.

The notice process has now been completed.  There were no objections to the settlement or requests for exclusion from the class.  Of the 338 notices mailed by the administrator, 22 were re-mailed to updated addresses and 5 were ultimately undeliverable. The administrator estimates that the average payment to class members will be $1,098.37, with a high payment of $3,552.25 and a low payment of $15.93.

At preliminary approval, the Court found that the settlement is a fair a reasonable compromise of the class claims and that the PAGA allocation is genuine, meaningful, and reasonable in light of the statute’s purposes.  It finds no reason to deviate from these findings now, especially considering that there are no objections.  The Court thus finds that the settlement is fair and reasonable for purposes of final approval.       

III. ATTORNEY FEES, COSTS, AND INCENTIVE AWARD

Plaintiff seeks a fee award of $245,000, or 35 percent of the gross settlement.  This is somewhat higher than 33 percent typically awarded.  Plaintiff provides a lodestar figure of $274,235, based on 421.90 hours spent on the case by counsel billing at $650 per hour.  Plaintiff’s request thus results in a negative multiplier.    

 

While the lodestar is above the requested fee award, the Court finds no reason to award counsel in this matter more than the typical one-third of the common fund considering the relevant factors.  (See Ketchum v. Moses (2001) 24 Cal.4th 1122, 1132 [in order to reflect the fair market value of attorney services, lodestar may be adjusted with a multiplier based on factors including the extent to which the nature of the litigation precluded other employment by the attorneys and the contingent nature of the fee award].)  Viewed in light of this cross-check, the Court will approve a one-third percentage fee, which is $233,333.33. (See Laffitte v. Robert Half Intern. Inc. (Cal. 2016) 1 Cal.5th 480, 488, 503–504 [trial court did not abuse its discretion in approving fee award of 1/3 of the common fund, cross-checked against a lodestar resulting in a multiplier of 2.03 to 2.13].) Per the settlement, the unapproved portion of the fee request will become part of the net settlement and will be distributed to the class.

Plaintiff’s counsel also request $16,045.29 in litigation costs, below the amount estimated at preliminary approval.  Plaintiff’s costs appear reasonable based on the summary provided and are approved.  The $11,250 in administrative costs are also approved.

  Finally, the named plaintiff seeks an incentive award of $10,000. To support his request, he submits a declaration describing his efforts on the case. The Court finds that the class representative is entitled to an enhancement award and the amount requested is reasonable.

IV.   ORDER AND JUDGMENT  

 

In accordance with the above, IT IS HEREBY ORDERED, ADJUDGED, AND DECREED THAT:          

 

The motion for final approval is GRANTED, with a reduced attorney fee award of $233,333.33.  The following classes are certified for settlement purposes:         

 

All current and former hourly-paid or non-exempt employees who worked for any of the Defendants within the State of California at any time during the Class Period [(May 3, 2015 until the Preliminary Approval Date)].

No one otherwise included in this definition is excluded from the class.

 

Judgment shall be entered through the filing of this order and judgment.  (Code Civ. Proc., § 668.5.)  Plaintiff and the members of the class shall take from their complaint only the relief set forth in the settlement agreement and this order and judgment.  Pursuant to Rule 3.769(h) of the California Rules of Court, the Court retains jurisdiction over the parties to enforce the terms of the settlement agreement and the final order and judgment.          

 

The Court sets a compliance hearing for June 15, 2023 at 2:30 P.M. in Department 1. At least ten court days before the hearing, class counsel and the settlement administrator shall submit a summary accounting of the net settlement fund identifying distributions made as ordered herein; the number and value of any uncashed checks; amounts redistributed to the class and remitted to the Controller’s Office; the status of any unresolved issues; and any other matters appropriate to bring to the Court’s attention.  Counsel shall also submit an amended judgment as described in Code of Civil Procedure section 384, subdivision (b). Counsel may appear at the compliance hearing remotely.        

The Court will prepare the order and judgment.

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LAW AND MOTION HEARING PROCEDURES

Remote hearings are required. If a party wants to appear in person, please contact Rowena Walker (rwalker@) to make that request.  

  

Effective August 15, 2022, Department 1 will be using Microsoft Teams for all remote hearings, unless otherwise ordered by the court. The Teams link for Department 1 can be found at .  

  

State and local rules prohibit recording of court proceedings without a court order. These rules apply while in court and also while participating in a hearing remotely or listening in on a public access line. 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 must participate remotely.   

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Calendar Line 2

Case Name: Ross Geraci v. HCL America, Inc. et al.

Case No.: 22CV394848

This is an action under the Private Attorneys General Act (“PAGA”), alleging wage and hour violations by Defendant HCL America Inc. (“HCLA”).

Before the Court is Defendant’s motion to compel arbitration pursuant to the United States Supreme Court’s recent decision in Viking River Cruises, Inc. v. Moriana (2022) ___U.S.___ [142 S. Ct. 1906, 2022 U.S. LEXIS 2940] (Viking River). Plaintiff opposes the motion on several grounds.

As discussed below, the Court GRANTS HCLA’s motion in part and DENIES it in part.

I. BACKGROUND

As alleged in the Complaint, HCLA is located in Sunnyvale and offers computer programming solutions including informational technology, infrastructure management, software engineering, data center, and application development services. (Complaint, ¶¶ 2–3.) Plaintiff worked for Defendant until April 27, 2021. (Id., p. 4.)

Plaintiff alleges that Defendant failed to pay him and other employees for all straight time and overtime worked, including on-call time and double time. (Complaint, ¶¶ 21–25.) Defendant also failed to provide compliant meal and rest periods, including because meal and rest periods were on-call. (Id., ¶¶ 26–32.) It failed to reimburse employees for business expenses associated with their use of their personal cell phones. (Id., ¶ 33.) HCLA imposed an absence control policy that deems sick leave an unauthorized absence that may result in discipline, discharge, demotion, or termination, and failed to itemize sick leave on wage statements. (Id., ¶¶ 35–36.)

Based on these allegations, Plaintiff brings PAGA claims for (1) failure to pay straight time wages, (2) failure to pay all overtime wages owed, (3) failure to provide meal periods, (4) failure to provide rest periods, (5) failure to reimburse business expenses, and (6) failure to provide paid sick days and failure to provide written notice setting forth the amount of sick leave available.

II. MOTION TO COMPEL ARBITRATION

Defendant moves to compel arbitration based on its Dispute Resolution Agreement (“DRA”), attached to the Declaration of Sunil Khanna as Exhibit 4, and Viking River. Plaintiff opposes the motion, arguing that HCLA fails to establish he consented to the DRA. And Plaintiff maintains that even if the DRA is enforced and individual arbitration is compelled per Viking River, he still has standing to bring representative PAGA claims in court. He asks the Court to stay those claims pending an upcoming decision by California Supreme Court that may provide relevant guidance. (See Adolph v. Uber Technologies, Inc. (June 16, 2022, No. S274671) ___Cal.5th___ [2022 Cal. LEXIS 4262] (Adolph) [authorizing supplemental briefing in light of Viking River].)

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 DRA states that it “is governed by the Federal Arbitration Act, 9 U.S.C. § 1 et seq. and evidences a transaction involving commerce.” But since the DRA 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 (Pinnacle).)

If the court orders arbitration “of a controversy which is an issue involved in [the] action or proceeding pending before [it], the court … shall, upon motion of a party …, stay the action or proceeding until an arbitration is had in accordance with the order to arbitrate or until such earlier time as the court specifies.” (Code Civ. Proc., § 1281.4.)

B. Existence and Scope of Agreement to Arbitrate

To show that Plaintiff consented to the DRA, HCLA provides a declaration by its Vice President of Human Resources Sunil Khanna. (A corrected version of Mr. Khanna’s declaration was filed on August 12, 2022.) Based on the onboarding process described in Mr. Khanna’s declaration, HCLA contends that Plaintiff gave both express and implied consent to the DRA.

1. Plaintiff’s Onboarding Process

Mr. Khanna declares that based on his review of Plaintiff s employment records, Plaintiff started working for Defendant in the position “Analyst, E1” on September 17, 2018. As part of its standard practices, Defendant e-mailed Plaintiff instructions on how to access the HCLA candidate portal to accept his offer letter and its attachments, including the DRA. Per these instructions, on August 28, 2018, Plaintiff “log[ged] into the HCLA candidate portal using the website link, and username and password unique to him; review[ed] the offer letter and its attachments, including the DRA; and after such required review of the offer letter and all attachments was completed, manually select[ed] ‘Yes’ to the prompt, ‘Do you accept the details contained within the offer letter and attached documents?’ ” The candidate portal allowed Plaintiff to download and save the offer letter and all attachments for future reference.

The exhibits to Mr. Khanna’s declaration appear to reflect that the offer letter and attachments were presented in the form of a single electronic document. The DRA is the next-to-last document in the package. It states in bold that “[a]rbitration is not a mandatory condition of your employment at the Company, and therefore you may submit a statement notifying the Company that you wish to opt out and not be subject to this Agreement.” This is followed by directions on how to opt out and a statement that “[i]f you do not opt out of this Agreement within 30 days of your first day of active employment with the Company, continuing your employment constitutes mutual acceptance of the terms of this Agreement by you and the Company.” Mr. Khanna’s declaration establishes that Plaintiff did not affirmatively opt out of the DRA.

Plaintiff does not dispute this evidence, but urges that the prompt to “accept the details contained within the offer letter and attached documents” does not reference the DRA. Nor does the offer letter, which instructs that “[i]n order to accept this offer, you must sign the Offer Letter (including all Annexures)….” The DRA is not identified as an “Annexure” to the offer letter and it does not have any signature line. Moreover, Annexure B defines “[t]he term Agreement used hereafter in Annexure B and C” as “this employment agreement along with the Offer Letter entered into between an Employee and the Company at the time the Employee is hired (‘Agreement’).” And Annexure B states that the offer presented is contingent upon “(i) your timely signing and returning this Agreement” and “(ii) your timely signing and returning the enclosed Dispute Regulation Agreement….” Plaintiff urges that he never signed the DRA as contemplated by Annexure B, and the DRA is not part of the employment agreement he accepted during his onboarding.[1] Given these circumstances, Plaintiff contends that he did not assent to the DRA.

2. Discussion

A recent opinion by the Court of Appeal for the Sixth District summarizes the law governing consent in the analogous context of arbitration provisions contained in employee handbooks. As that opinion explains,

[t]he strong public policy favoring contractual arbitration does not extend to parties who have not agreed to arbitrate. (Esparza v. Sand & Sea, Inc. (2016) 2 Cal.App.5th 781, 787 [206 Cal. Rptr. 3d 474] (Esparza).) As the California Supreme Court explained in Pinnacle, in “California, ‘[g]eneral principles of contract law determine whether the parties have entered a binding agreement to arbitrate.’ (Craig v. Brown & Root, Inc. (2000) 84 Cal.App.4th 416, 420 [100 Cal. Rptr. 2d 818] [(Craig)]; [citation].)  Generally, an arbitration agreement must be memorialized in writing.  [Citation.] A party’s acceptance of an agreement to arbitrate may be express, as where a party signs the agreement.  A signed agreement is not necessary, however, and a party’s acceptance may be implied in fact (e.g., Craig, at p. 420 [employee’s continued employment constitutes acceptance of an arbitration agreement proposed by the employer]) or be effectuated by delegated consent ([citation].)  An arbitration clause within a contract may be binding on a party even if the party never actually read the clause. (24 Hour Fitness, Inc. v. Superior Court (1998) 66 Cal.App.4th 1199, 1215 [78 Cal. Rptr. 2d 533].)” (Pinnacle, supra, 55 Cal.4th at p. 236.)

(Mendoza v. Trans Valley Transport (2022) 75 Cal.App.5th 748, 777 (Mendoza).)

a. express agreement to arbitrate

Mendoza summarizes in detail six California authorities that have considered “whether the language of an arbitration provision in an employee handbook, on its own or when combined with other documents, creates a binding agreement to arbitrate employment-related claims.” (Mendoza, supra, 75 Cal.App.5th at p. 778.) Among the most relevant is Sparks v. Vista Del Mar Child & Family Services (2012) 207 Cal.App.4th 1511 (Sparks), abrogated on another ground as stated in Harris v. TAP Worldwide, LLC (2016) 248 Cal.App.4th 373 (Harris).

In Sparks, an

arbitration clause in [an employee] handbook was not prominently distinguished from the other clauses, was not specifically highlighted, and there was no place for the employee to acknowledge it in writing. In addition, the acknowledgment form “did not reference the arbitration clause much less advise [the employee] that he would be bound by it.” Because the language in the handbook suggested it “was informational rather than contractual” and the employer failed to call attention to the arbitration clause in the acknowledgment form, the court found there was no agreement to arbitrate.

(Mendoza, supra, 75 Cal.App.5th at p. 780, citations omitted.)

Mendoza also discussed Harris, where “[t]he employee argued that the parties had not agreed to arbitrate because he did not sign the separate arbitration agreement described by the handbook, the [summary] arbitration provision on page 9 of the handbook, or Appendix A [providing the full arbitration policy announced by the handbook], and had only acknowledged receipt of documents.” (Mendoza, supra, 75 Cal.App.5th at p. 781, citation omitted.) The Harris court nevertheless concluded that the parties had agreed to arbitrate:

The court reasoned that the employee had specifically acknowledged receipt of the arbitration agreement. The court added that the handbook’s table of contents referred the reader to page 9 with the subject heading of “‘BINDING ARBITRATION OF CLAIMS,’” that the obligation to arbitrate was highlighted on page 9 in bold underscored letters, that page 9 expressly mentioned appendix A, and stated “without equivocation that receipt and agreement to the mandatory arbitration policy is ‘an absolute prerequisite’ to hiring and continued employment” and that “‘[i]f, for any reason, an applicant fails to execute the Agreement to Arbitrate yet begins employment, that employee will be deemed to have consented to the Agreement to Arbitrate by virtue of receipt of this Handbook.’”

(Mendoza, supra, 75 Cal.App.5th at p. 781, citation omitted.)

Mendoza also summarized Esparza, which held that an employee’s execution of an “acknowledgment form did not create an agreement to arbitrate because (1) although it mentioned the employer’s arbitration policy, it did not say that the employee agreed to abide by the arbitration provision; (2) it said the handbook was merely informational; and (3) it expressly recognized that the employee had not yet read the handbook and there was no basis to assume the employee agreed to be bound by something she had not read.” (Mendoza, supra, 75 Cal.App.5th at p. 782.)

In Mendoza itself, Court of Appeal noted that the arbitration policy was the first substantive provision in the employee handbook and was identified in bold as a condition of employment and a “Binding Arbitration Policy”—but this did not stand out from several other policies that were similarly or even more emphasized. (Mendoza, supra, 75 Cal.App.5th at pp. 783–784.) Ultimately, “[t]he Arbitration Policy was not prominently distinguished from the other clauses in the Handbook, was not specifically highlighted, did not stand out from other sections in the Handbook visually or in its use of language, and there was no place in the Handbook for the employee to sign or acknowledge the Arbitration Policy in writing.” (Ibid.) The court emphasized that the operative documents included “language … indicat[ing] that the Handbook and acknowledgment forms were intended to be informational, not contractual” and “referred to the arbitration clause … as a ‘policy,’ rather than a ‘contract’ or ‘agreement’ to arbitrate. These factors all weigh against finding an agreement to arbitrate.” (See id. at pp. 784–785.)

The acknowledgement forms the employee executed did not fix these problems:

The First Acknowledgment that Mendoza signed mentions numerous topics in 12 paragraphs on two pages (i.e., his “pay plan,” the at-will nature of his employment, meal and rest breaks, and other matters). It contains the following general reference to the Handbook: “You will be required to abide by all applicable rules and policies, including but not necessarily limited to those set forth in the [Handbook].” Above the signature line, it stated, “I have read the [First] Acknowledgment and agree to its terms.” Conspicuously absent was any mention of arbitration, alternative dispute resolution, or the Arbitration Policy.

The Second Acknowledgment consisted of 3 paragraphs and a signature line on a single page, in which Mendoza acknowledged receipt of the Handbook. The form stated: “In consideration of my employment with the Company, I hereby agree to read, observe, and abide by the conditions of employment, policies and rules contained in this Handbook.” It … stated that the Handbook and the policies contained therein “are not in any way intended as a contract of employment,” that the Handbook represented “the entire understanding between” Mendoza and FTU and could only be altered by a “written agreement, signed by an officer of the Company.” As before, conspicuously absent was any mention of arbitration, alternative dispute resolution, or the Arbitration Policy.

Nothing in the acknowledgment forms notified Mendoza either that the Handbook contained an arbitration clause or that his acceptance of the Handbook constituted a waiver of his right to a judicial forum in which to resolve his wage and hour claims.  (Sparks, supra, 207 Cal.App.4th at p. 1520….) Since the Handbook “was informational rather than contractual” and FTU failed to call attention to the arbitration requirement in the acknowledgment form, Mendoza should not be required to arbitrate.  (Sparks, at p. 1520.)  Merely agreeing to abide by all applicable rules and policies and to “read, observe and abide by” the contents of the Handbook that “is designed for quick reference and general information” does not constitute a contract and does not bind the employee to arbitration.  (See id. at p. 1521.)  “To support a conclusion that an employee has relinquished his or her right to assert an employment-related claim in court, there must be more than a boilerplate arbitration clause buried in a lengthy employee handbook … . At a minimum, there should be a specific reference to the duty to arbitrate … in the acknowledgment of receipt form signed by the employee.” (Id. at p. 1522.) …

(Mendoza, supra, 75 Cal.App.5th at pp. 785–786.)

Mendoza distinguished Harris because “(1) the acknowledgment forms here did not mention the Arbitration Policy or otherwise incorporate it by reference; (2) the Arbitration Policy was not highlighted in a table of contents and did not stand out from the other sections of the Handbook; (3) the ‘condition of employment language’ at the end of the Arbitration Policy is not nearly as explicit or unequivocal as the language in the arbitration clause in Harris; and (4) nothing advised Mendoza that he would be deemed to have consented to arbitration by accepting the employment if he failed to sign an arbitration agreement.” (Id. at p. 788.)

Here, three of these four distinguishing circumstances are present. The acknowledgement prompt presented to Plaintiff did not mention arbitration or the DRA. Nor did the “Employee Acknowledgement” presented within the offer letter package itself. The DRA does not stand out from the rest of the materials in the offer letter package—if anything, it is less emphasized than the “Annexures” expressly defined as part of the parties’ employment “Agreement.” Acceptance of the DRA is not clearly and unequivocally described as a “condition” of employment like acceptance of the “Annexures” is: while un-emphasized language in Annexure B says that “timely signing and returning” the DRA (which did not happen here) is a condition of employment, contradictory language in the DRA itself states in bold that “[a]rbitration is not a mandatory condition of your employment at the Company, and therefore you may submit a statement notifying the Company that you wish to opt out and not be subject to this Agreement.”

On the other hand, the DRA provides direction on how to opt out and states that “[i]f you do not opt out of this Agreement within 30 days of your first day of active employment with the Company, continuing your employment constitutes mutual acceptance of the terms of this Agreement by you and the Company.” And unlike in Mendoza, the DRA is described on its face as a “contract.”

Ultimately, as emphasized by Mendoza and Sparks, the language employed throughout the relevant documents is not clear that the DRA was a contract to which Plaintiff was assenting during his onboarding. The prompt to which Plaintiff agreed, “Do you accept the details contained within the offer letter and attached documents?” is hardly clear that all of these “details” are in fact binding contractual terms. And the offer letter package itself provides an express definition of the documents that constitute the parties’ employment “Agreement”—a definition that does not include the DRA. The DRA itself states that employees have 30 days to opt out before they will be deemed to have accepted its terms. Considering this context, the DRA is most reasonably interpreted as a separate agreement to which Plaintiff never expressly assented. This is consistent with the view expressed in both Sparks and Mendoza that “ ‘[a]t a minimum, there should be a specific reference to the duty to arbitrate … in the acknowledgment of receipt form signed by the employee.’ ” (Mendoza, supra, 75 Cal.App.5th at p. 786, quoting Sparks.) It is also consistent with Harris’s reliance on such a specific reference to distinguish Sparks. (See Harris, supra, 248 Cal.App.4th at p. 383 [“the acknowledgement form which plaintiff signed included acknowledging receiving both the Employee Handbook and the attached arbitration agreement”], emphasis original.)

Having concluded that Plaintiff did not expressly assent to the DRA, the Court turns to the issue of implied consent.

b. implied agreement to arbitrate

“When an employee continues his or her employment after notification that an agreement to arbitration is a condition of continued employment, that employee has impliedly consented to the arbitration agreement.” (Diaz v. Sohnen Enterprises (2019) 34 Cal.App.5th 126, 130 [employee was notified of dispute resolution policy and that continued employment would itself constitute acceptance in two in-person meetings].) But as explained by Mendoza, such notice must be clear. Underscoring this point, Mendoza summarized and distinguished a case that Defendant relies on, Craig:

After the employee in Craig had worked for the employer for 12 years, the employer established a four-step dispute resolution program that culminated in arbitration. The employer moved to compel arbitration and presented evidence that it had sent a memorandum to all employees, including the plaintiff, in both 1993 and 1994, advising them of the new dispute resolution program.  The memorandum explained the purpose of the program and emphasized that everyone would be bound by it, stating: “The enclosed brochure explains the procedures as well as how the Dispute Resolution Program works as a whole. Please take the time to read the material. IT APPLIES TO YOU. It will govern all future legal disputes between you and the Company that are related in any way to your employment.” …

This case is distinguishable from Craig. … The memoranda in Craig, which are analogous to the acknowledgment forms in this case, expressly mentioned the dispute resolution program and advised the employee that the program applied to her and “will govern all future legal disputes … related in any way to [her] employment.” Unlike the memoranda in Craig that provided clear notice of the alternative dispute program, the acknowledgment forms here did not mention the Arbitration Policy.

(Mendoza, supra, 75 Cal.App.5th at pp. 789–790, citations omitted.)

Mendoza also distinguished Harris, which it described as “[t]he only case to apply the implied-in-fact contract theory to an arbitration agreement in an employee handbook.” (Mendoza, supra, 75 Cal.App.5th at p. 790.) Mendoza emphasized that Harris “relied on language in the handbook that expressly addressed the effect of the employee’s failure to execute the written arbitration agreement in the handbook and provided that upon commencing the employment, the employee was deemed to have consented to arbitration. (Id. at pp. 383–384.)  There is no such provision in the documents at issue here.” (Ibid.) Mendoza noted that Esparza similarly distinguished Harris “reasoning—as we have—that there was no contractual language in the handbook … that provided that if the employee voluntarily continues to work, she ‘ “will be deemed to have knowingly and voluntarily consented to and accepted” ’ the terms and conditions in the handbook’s arbitration agreement. …” (Mendoza, supra, 75 Cal.App.5th at pp. 790–791.)

Here, the DRA does clearly state that “[i]f you do not opt out of this Agreement within 30 days of your first day of active employment with the Company, continuing your employment constitutes mutual acceptance of the terms of this Agreement by you and the Company.” It is clearly and prominently labeled as a “contract” and is nowhere described as merely informational. And the DRA was provided, not buried within an employee handbook full of other policies, but as a standalone document included in a package with only a few other onboarding materials, whose “details” Plaintiff agreed to “accept.” Under these circumstances, HCLA has established that Plaintiff had clear notice of the DRA and provided implied consent by failing to opt out within 30 days of employment. (Cf. Ajamian v. CantorCO2e, L.P. (2012) 203 Cal.App.4th 771, 804–806 [employee who did not execute arbitration agreement included in handbook received at the beginning of her employment did not provide implied consent by continuing employment after her contract was terminated years later, purportedly subjecting her to pre-existing “policies then in effect”].)

3. Conclusion

As discussed above, HCLA establishes that Plaintiff accepted the DRA through implied consent. Plaintiff does not otherwise dispute the DRA’s validity or that it covers the employment claims at issue in this action. So the Court turns to the impact of Viking River and the related issues raised by the parties.

C. Impact of Viking River

The parties agree that if the DRA is a valid agreement to arbitrate, Viking River requires that the individual component of Plaintiff’s PAGA claims be arbitrated. HCLA urges that Viking River also compels the dismissal of Plaintiff’s representative PAGA claims. Plaintiff asks the Court to stay the representative claims pending the California Supreme Court’s decision in Adolph, which may provide guidance on this issue.

1. Holding of 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.

In rendering its decision, 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.[2] 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.)

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.)

Here, the PAGA waiver and associated severability clause in the DRA are comparable to the language at issue in Viking River, and Plaintiff does not contend otherwise.[3] So Defendant is entitled to compel arbitration of Plaintiff’s individual PAGA claims. But the DRA’s purported waiver of representative PAGA claims remains invalid under Iskanian.

So the question becomes: what to do with the representative claims while the individual claims are arbitrated? HCLA contends that Viking River requires the Court to dismiss the representative claims, while Plaintiff asks the Court to stay them pending anticipated guidance from the California Supreme Court.

2. Fate of the Representative PAGA Claims

Viking River anticipated the question of what to do with representative PAGA claims where individual PAGA claims are subject to arbitration. The opinion reiterated that “[u]nder our holding in this case, [non-individual PAGA] claims may not be dismissed simply because they are ‘representative.’  Iskanian’s rule remains valid to that extent.” (Viking River, supra, 142 S.Ct. at pp. 1925.) It went on to opine that

as we see it, PAGA provides no mechanism to enable a court to adjudicate nonindividual [sic] PAGA claims once an individual claim has been committed to a separate proceeding.  Under PAGA’s standing requirement, a plaintiff can maintain non-individual PAGA claims in an action only by virtue of also maintaining an individual claim in that action. See Cal. Lab. Code Ann. §§2699(a), (c). When an employee’s own dispute is pared away from a PAGA action, the employee is no different from a member of the general public, and PAGA does not allow such persons to maintain suit.  See [Kim v. Reins International California, Inc. (2020) 9 Cal.5th 73,] 90, 459 P. 3d, at 1133 [(Kim)] (“PAGA’s standing requirement was meant to be a departure from the ‘general public’ . . . standing originally allowed” under other California statutes).  As a result, Moriana lacks statutory standing to continue to maintain her non-individual claims in court, and the correct course is to dismiss her remaining claims.

(Viking River, supra, 142 S.Ct. at pp. 1925.)

However, as Justice Sotomayor’s[4] and Justice Barrett’s[5] concurring opinions recognize, this brief discussion of PAGA’s standing requirement is a federal court’s interpretation of California law not binding on this Court. (See People v. Alorica Inc. (2022) 77 Cal.App.5th 60, 67, fn. 2 [“a federal court’s interpretation of California state law is not binding”]; California Medical Assn. v. Aetna Health of California Inc. (2021) 63 Cal.App.5th 660, 670 [same, addressing federal court’s interpretation of standing under California’s Unfair Competition Law].)

The Court respectfully disagrees with Viking River’s interpretation of PAGA’s standing requirement. The binding authority of the California Supreme Court in Kim, supra, 9 Cal.5th at p. 80 holds that disposition of individual claims does not strip an aggrieved employee of standing, as the state’s authorized representative, to pursue remedies under PAGA. Given the holding in Kim, Plaintiff does not lack standing to pursue his representative PAGA claims, and the Court will deny the request to dismiss those claims.

The Court agrees with Plaintiff that it makes sense to stay his representative claims pending the California Supreme Court’s opinion in Adolph, and will do so pursuant to its inherent authority to manage this case. When Adolph is decided, the parties shall meet and confer about whether the representative PAGA claims should be dismissed, stayed pending arbitration of Plaintiff’s individual PAGA claims, or litigated in tandem with any arbitration.

III. CONCLUSION

For the reasons discussed above, the Court GRANTS HCLA’s motion to compel arbitration as to the individual component of Plaintiff’s PAGA claims. The Court DENIES HCLA’s motion insofar as it seeks dismissal of Plaintiff’s representative PAGA claims. Those claims are hereby STAYED pending a decision in Adolph.

The Court will prepare the order.    

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LAW AND MOTION HEARING PROCEDURES

Remote hearings are required. If a party wants to appear in person, please contact Rowena Walker (rwalker@) to make that request.  

  

Effective August 15, 2022, Department 1 will be using Microsoft Teams for all remote hearings, unless otherwise ordered by the court. The Teams link for Department 1 can be found at .  

  

State and local rules prohibit recording of court proceedings without a court order. These rules apply while in court and also while participating in a hearing remotely or listening in on a public access line. 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 must participate remotely.   

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Case Name: Steven Hammer v. Daylight Foods, Inc., et al.

Case No.: 21CV378146

This is a putative class action. Plaintiffs allege that Defendant Daylight Foods, Inc. misclassified its drivers as exempt and consequently committed a range of wage and hour violations as to these employees.

Now before the Court is Plaintiffs’ motion for preliminary approval of a settlement of the class claims, which is unopposed. As discussed below, the Court GRANTS preliminary approval.

I. BACKGROUND

Defendant employed Plaintiff Steven Hammer as an exempt driver from June 2014 to March 2018, and Plaintiff Michael Holdiman in the same capacity from October 2018 to February 2019. (First Amended Class Action Complaint for Damages (“FAC”), ¶ 18.) But Plaintiffs allege that drivers were misclassified as exempt. (See id., ¶ 16.)

Plaintiffs allege that Defendant failed to pay drivers overtime compensation and to provide required meal and rest breaks or associated premiums. (FAC, ¶¶ 26–29, 36–37.) Drivers did not receive minimum wages for all hours worked and did not receive all wages owed at discharge or resignation, including overtime and minimum wages and meal and rest period premiums. (Id., ¶¶ 30–31, 38–39.) They did not receive accurate wage statements because, among other things, their wage statements failed to reflect the total number of hours they worked. (Id., ¶¶ 32, 40.) Drivers were not reimbursed for expenses including gas and mileage for required travel between worksites, office equipment, and cell phone usage. (Id., ¶ 33.) And Defendant did not keep complete and accurate payroll records for Plaintiffs and other putative class members. (Id., ¶¶ 34, 41.)

Based on these allegations, Plaintiffs assert putative class claims against Defendant for: (1) violation of Labor Code sections 510 and 1198 by failing to pay overtime; (2) violation of Labor Code sections 226.7 and 512, subdivision (a) by failing to provide meal and rest periods; (3) violation of Labor Code section 226.7 by failing to provide rest periods; (4) violation of Labor Code sections 1194 and 1197 by failing to pay minimum wages; (5) violation of Labor Code sections 201 and 202 by failing to timely pay wages at separation of employment; (6) violation of Labor Code section 226, subdivision (a) by failing to provide accurate wage statements; (7) violation of Labor Code sections 2800 and 2802 by failing to reimburse business expenses; and (8) violation of Business & Professions Code section 17200 et seq.

Now, Plaintiffs move for an order preliminarily approving the settlement of the class claims, provisionally certifying the settlement class, approving the form and method for providing notice to the class, and scheduling a final fairness hearing.

II. LEGAL STANDARD FOR SETTLEMENT APPROVAL

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 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 burden is on the proponent of the settlement to show that it is fair and reasonable.  However “a presumption of fairness exists where: (1) the settlement is reached through arm’s-length bargaining; (2) investigation and discovery are sufficient to allow counsel and the court to act intelligently; (3) counsel is experienced in similar litigation; and (4) the percentage of objectors is small.”    

 

(Wershba, supra, 91 Cal.App.4th at p. 245, citation omitted.)  The presumption does not permit the Court to “give rubber-stamp approval” to a settlement; in all cases, it must “independently and objectively analyze the evidence and circumstances before it in order to determine whether the settlement is in the best interests of those whose claims will be extinguished,” based on a sufficiently developed factual record.  (Kullar, supra, 168 Cal.App.4th at p. 130.)

III. SETTLEMENT PROCESS

After filing this action, Mr. Hammer propounded formal written discovery, including one set of discovery requests addressed specifically to an arbitration agreement that Defendant used. The parties then met and conferred and agreed to exchange informal discovery and attempt mediation.

Defendant provided documents relating to its wage-and-hour policies, practices, and procedures, including those regarding meal and rest breaks, driver manifests, and other payroll and operational policies. Plaintiffs reviewed time records, pay records, and information provided by Defendant relating to the size and scope of the class and the number of workweeks at issue. They also interviewed putative class members who worked for Defendant throughout the class period.

On May 16, 2022, the parties held a mediation with Lisa Klerman, Esq. While they did not reach a settlement that day, they ultimately accepted a mediator’s proposal resulting in the settlement before the Court.

IV. SETTLEMENT PROVISIONS

The non-reversionary gross settlement amount is $380,000.  Attorney fees of up to $126,666.66 (one-third of the gross settlement), litigation costs of up to $20,000, and up to $7,500 in administration costs (currently estimated at $6,950) will be paid from the gross settlement. The named plaintiffs will seek incentive awards of $10,000 each.

The net settlement, approximately $205,833.34, will be allocated to settlement class members proportionally based on their workweeks during the class period. The average payment will be around $1,633.60 to each of the 126 class members. Class members will not be required to submit a claim to receive their payments. For tax purposes, settlement payments will be allocated 20 percent to wages and 80 percent to penalties and interest. The employer’s share of taxes will be paid separately from the gross settlement. Funds associated with checks uncashed after 180 days will be transmitted to Legal Aid at Work.

In exchange for the settlement, class members who do not opt out will release

any and all claims that were actually alleged or that could have been alleged in the operative complaint, including but not limited to state wage and hour claims for any and all violations of California’s Labor Code, Wage Orders, and Unfair Competition Law based on Defendant’s alleged misclassification of its drivers as exempt, failure to pay for all hours worked (including minimum wages, straight time wages, and overtime wages), failure to provide meal periods, failure to authorize and permit rest periods, failure to timely pay all wages due at the time of termination, failure to furnish accurate, itemized wage statements, failure to timely pay wages during employment, failure to properly reimburse for all business-related expenses, and all damages, interest, penalties, attorneys” fees, costs, and other amounts recoverable under said causes of action under California law, to the greatest extent permissible.

The release is appropriately tailored to the allegations at issue. (See Amaro v. Anaheim Arena Management, LLC (2021) 69 Cal.App.5th 521, 537.)  

V. FAIRNESS OF SETTLEMENT

Plaintiffs estimate that the maximum exposure for all of the claims in the case would be $5,736,908.50 to $7,782,037.10. The entire value of the case essentially depends on whether drivers were misclassified. Plaintiffs argued that drivers are not executives, professionals, or administrative and do not fall within the traditional exemption. Moreover, the average hourly rate of $25.93 does not satisfy the salary test of double minimum wage when considering the local minimum wage. Furthermore, because drivers work more than 40 hours per week, the flat salary does not compensate them for overtime hours. Plaintiffs’ interviews with drivers revealed that they worked from 10 hours to 14 hours per day, five days per week, or a minimum of 50 and a maximum of 70 hours per week. Because Defendant does not keep time records of actual hours worked, Plaintiffs argued that drivers worked an average of 60 hours per week.

Plaintiffs calculate the exposure for unpaid minimum wages as $3,519,968 and for unpaid regular wages as $5,565,096.60. The overtime claims were valued at zero because drivers are subject to the “Motor Carrier Exemption.” Plaintiffs valued the meal and rest break claims at $1,113,174.90, accounting for the likely preemption of these claims during a portion of the class period. They valued the cell phone reimbursement theory at $39,616, and did not assign value to the theory based on drivers’ use of their personal vehicles since this was infrequent and was often reimbursed according to driver interviews. The wage statement penalties were estimated at $112,000 and the waiting time penalties at $952,149.60. Plaintiffs applied a fifty percent discount to these valuations based on the risks at class certification, another fifty percent discount based on the risk that drivers would fall into the “interstate commerce exemption,” and another thirty-five percent discount for risks on the merits at trial, resulting in a realistic value for the case of $501,979.49 to $680,938.25.

The settlement represents about 5 percent of the maximum value of the case including penalties, or about 5.7 percent of the full value of the core claims ($6.7 million). This is at the low end of what the Court would consider approving, so the Court directed Plaintiffs’ counsel to file a supplemental declaration more thoroughly addressing certain issues pertaining to the risks on the merits and other risks in obtaining full recovery here. The Court has reviewed and considered that declaration and based on the analysis it presents, the Court finds that the settlement is fair and reasonable for purposes of preliminary approval.

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.) While 1/3 of the common fund for attorney fees is generally considered reasonable, 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.  (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

 

Plaintiffs request that the following settlement class be provisionally certified:  

all exempt drivers employed by Daylight Foods, Inc. (“Defendant”) within the State of California at any time since September 18, 2016 through and including September 18, 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.”  California 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 ….”

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. 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.

(Noel, supra, 7 Cal.5th at p. 980, citation omitted.)

“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 126 class members are readily identifiable based on Defendant’s records, and the settlement class is appropriately 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, common legal and factual issues predominate.  Plaintiffs’ claims all arise from Defendant’s wage and hour practices applied to the similarly-situated class members.    

 

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 exempt drivers and allege that they experienced the violations at issue. The anticipated defenses are not unique to Plaintiffs, and there is no indication that Plaintiffs’ interests are otherwise in conflict with those of the class.

 

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.)

 

   Plaintiffs have the same interest in maintaining this action as any class member would have.  Further, they have hired experienced counsel.  Plaintiffs have sufficiently demonstrated adequacy of representation.

 

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, there are an estimated 126 class members.  It would 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 or object.  The gross settlement amount and estimated deductions are provided. Class members are informed of their qualifying workweeks as reflected in Defendant’s records and instructed how to dispute this information. The notice makes it clear that class members may appear at the final fairness hearing to make an oral objection without filing a written objection. Class members are given 60 days to request exclusion from the class, submit a written objection to the settlement, or dispute their workweek information.

At the Court’s direction, the notice was modified to instruct class members that they may opt out of or object to the settlement by simply providing their name, without the need to provide their address or other identifying information.  The notice describes how notice of final judgment will be provided to the class.  (Cal. Rules of Court, Rule 3.771(b).) The notice was corrected with regard to the cy pres recipient.

   

Regarding appearances at the final fairness hearing, the notice was further modified to instruct class members as follows:      

Hearings before the judge overseeing this case will be conducted remotely.  (As of August 15, 2022, the Court’s remote platform is Microsoft Teams.)  Class members who wish to appear 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. 

Turning to the notice procedure, the parties have selected Phoenix Settlement Administrators as the settlement administrator. The administrator will mail the notice packet within 35 calendar days of preliminary approval, after updating class members’ addresses using the National Change of Address Database. Any returned notices will be re-mailed to any forwarding address provided or located using skip traces and other searches. Class members who receive a re-mailed notice will have an additional 10 days to respond. These notice procedures are appropriate and are approved.

VIII. CONCLUSION

Plaintiffs’ motion for preliminary approval is GRANTED. The final approval hearing shall take place on February 9, 2023 at 1:30 p.m. in Dept. 1.  The following class is preliminarily certified for settlement purposes:     

all exempt drivers employed by Daylight Foods, Inc. (“Defendant”) within the State of California at any time since September 18, 2016 through and including September 18, 2022.

Before final approval, Plaintiffs shall lodge any individual settlement agreements they may have executed in connection with their employment with Defendant for the Court’s review.  

The Court will prepare the order.    

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LAW AND MOTION HEARING PROCEDURES

Remote hearings are required. If a party wants to appear in person, please contact Rowena Walker (rwalker@) to make that request.  

  

Effective August 15, 2022, Department 1 will be using Microsoft Teams for all remote hearings, unless otherwise ordered by the court. The Teams link for Department 1 can be found at .  

  

State and local rules prohibit recording of court proceedings without a court order. These rules apply while in court and also while participating in a hearing remotely or listening in on a public access line. 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 must participate remotely.   

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Calendar Line 4

Case Name: Hiromi Meguro v. Silicon Valley Bank, et al.

Case No.: 20CV369854

This is a putative class and Private Attorneys General Act (“PAGA”) action. Plaintiff alleges that Defendant Silicon Valley Bank failed to properly calculate the regular rate of pay used to pay overtime, and issued wage statements that failed to correctly identify the overtime rate and the total hours worked in pay periods that included overtime.

Now before the Court is Plaintiff’s motion for preliminary approval of a settlement of the class and PAGA claims, which is unopposed. As discussed below, the Court GRANTS preliminary approval.       

I. BACKGROUND

Plaintiff began working for Defendant in 2018. (First Amended Class and Representative Action Complaint (“FAC”), ¶ 9.) Until her employment as a business data analyst was terminated in August 2020, she was paid on an hourly basis as a non-exempt employee. (Ibid.)

Plaintiff alleges that her wage statements incorrectly identified the overtime rate as the base hourly rate of pay or one-half of the hourly rate. (Id., ¶ 9.) In addition, whenever overtime wages were paid during her employment, Plaintiff’s wage statements showed hours that, when added up, do not appear to add up to the actual total hours worked. (Ibid.) Moreover, Defendant consistently failed to properly calculate the regular rate of pay by not accounting for all non-discretionary compensation, including incentives, bonuses, and non-cash awards. (Ibid.) For example, Plaintiff received an “Annual Incentive Bonus” that was not included in her regular rate of pay for purposes of calculating overtime. (Ibid.) Finally, Defendant failed to pay even 1.5 times the base hourly rate of pay for all overtime hours due to rounding of the applicable pay rates. (Id., ¶ 3.) For example, when Plaintiff was paid a base hourly rate of $40.21, she was entitled to an overtime rate of $60.32—but Defendant paid her only $60.31. (Ibid.)

Based on these allegations, Plaintiff asserts putative class claims for: (1) violation of Labor Code sections 510, 558, and 1194 by failing to pay overtime; (2) violation of Labor Code section 226, subdivision (a) by failing to provide accurate wage statements; and (3) violation of Business & Professions Code section 17200 et seq. Plaintiff also brings (4) a representative claim for PAGA penalties.

Now, Plaintiff moves 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, and scheduling a final fairness hearing.

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 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 burden is on the proponent of the settlement to show that it is fair and reasonable.  However “a presumption of fairness exists where: (1) the settlement is reached through arm’s-length bargaining; (2) investigation and discovery are sufficient to allow counsel and the court to act intelligently; (3) counsel is experienced in similar litigation; and (4) the percentage of objectors is small.”    

 

(Wershba, supra, 91 Cal.App.4th at p. 245, citation omitted.)  The presumption does not permit the Court to “give rubber-stamp approval” to a settlement; in all cases, it must “independently and objectively analyze the evidence and circumstances before it in order to determine whether the settlement is in the best interests of those whose claims will be extinguished,” based on a sufficiently developed factual record.  (Kullar, supra, 168 Cal.App.4th at p. 130.)

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 (Viking River).)  

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

On May 20, 2021, Plaintiff served written discovery requests and on July 6, 2021, Defendant served responses. Plaintiff continued investigating the claims and notified Defendant about new theories of liability for failure to pay all overtime wages and provide accurate wage statements. The parties supplemented formal discovery by continuing to informally exchange pertinent information and documents.

On November 8, 2021, the parties engaged in mediation with Michael Loeb. With his assistance and based on a mediator’s proposal, they were able to reach the settlement before the Court. Pursuant to the settlement, the parties filed the FAC to specify additional facts regarding Defendant’s alleged underpayment of overtime.

IV. SETTLEMENT PROVISIONS

The non-reversionary gross settlement amount is $500,000.  Attorney fees of up to $166,666.67 (one-third of the gross settlement), litigation costs of up to $10,000, and up to $9,000 in administration costs will be paid from the gross settlement. $25,000 will be allocated to PAGA penalties, 75 percent of which ($18,750) will be paid to the LWDA. The named plaintiff will seek an incentive award of $10,000.

The net settlement, approximately $285,583.33, will be allocated to settlement class members proportionally based on their relevant pay periods during the class period. By the Court’s calculation, the average payment will be around $791 to each of the 361 class members. Class members will not be required to submit a claim to receive their payments. For tax purposes, settlement payments will be allocated 5 percent to wages and 95 percent to penalties and interest. The employer’s share of taxes will be paid separately from the gross settlement. Funds associated with checks uncashed after 180 days will be transmitted to the State of California’s Unclaimed Property Fund in the name of the relevant individual.

In exchange for the settlement, class members who do not opt out will release “any and all claims during the Class Period … arising out of the claims expressly pleaded in the Action and all other claims, such as those under the California Labor Code, applicable Wage Orders, the Fair Labor Standards Act, regulations, or other provisions of law, or [sic] that could have been pleaded based on the facts pleaded in the Action for (1) failure to pay overtime wages, (2) failure to provide accurate itemized wage statements, (3) failure to timely pay wages during employment or upon termination, (4) unfair business practices based on these violations, and (5) all claims for injunctive relief, liquidated damages, and penalties.” The PAGA release encompasses “any and all claims during the PAGA Period for civil penalties, fees, and costs pleaded in the Action or that could have been pleaded based on the facts alleged in the Action and preceding PAGA notices to the LWDA.”

The releases are appropriately tailored to the allegations at issue. (See Amaro v. Anaheim Arena Management, LLC (2021) 69 Cal.App.5th 521, 537.) Consistent with the statute, aggrieved employees will not be able to opt out of the PAGA portion of the settlement.

V. FAIRNESS OF SETTLEMENT

Plaintiff estimates that the maximum total value of the action is $2,363,822, so that the settlement represents a 21.2 percent recovery. This includes approximately $198,072 in waiting time penalties, $436,000 in wage statement penalties, and $1,729,750 in PAGA penalties. Plaintiff explains that the value of the overtime claims was largely from the associated waiting time penalties rather than the actual underpaid overtime wages. The Court agrees that the settlement achieves a good result for the class considering the technical nature of the violations alleged and the portion of the case’s value is associated with uncertain penalty awards. The Court accordingly 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.) While 1/3 of the common fund for attorney fees is generally considered reasonable, 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.  (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].) Counsel must also address their fee-splitting arrangement at that time.

VI. PROPOSED SETTLEMENT CLASS

 

Plaintiff requests that the following settlement class be provisionally certified:  

all hourly, non-exempt employees who are currently or have been employed by Defendant, Silicon Valley Bank, in the State of California and either (i) earned overtime wages and non-discretionary compensation, including incentives, bonuses, and non-cash awards, at any time from April 6, 2016, through January 7, 2022 (the “Class Period”) or (ii) earned overtime wages at any time from April 6, 2019, through January 7, 2022 (the “PAGA Period”).

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.”  California 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 ….”

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. 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.

(Noel, supra, 7 Cal.5th at p. 980, citation omitted.)

“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 361 class members are readily identifiable based on Defendant’s records, and the settlement class is appropriately 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, common legal and factual issues predominate.  Plaintiff’s claims all arise from Defendant’s wage and hour practices applied to the similarly-situated class members.    

 

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 alleges that she experienced the violations at issue. The anticipated defenses are not unique to Plaintiff, and there is no indication that Plaintiff’s interests are otherwise in conflict with those of the class.

 

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.)

 

   Plaintiff has the same interest in maintaining this action as any class member would have.  Further, she has hired experienced counsel.  Plaintiff has sufficiently demonstrated adequacy of representation.

 

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, there are an estimated 361 class members.  It would 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 or object.  The gross settlement amount and estimated deductions are provided. Class members are informed of their qualifying workweeks as reflected in Defendant’s records. The notice makes it clear that class members may appear at the final fairness hearing to make an oral objection without filing a written objection. Class members are given 45 days to request exclusion from the class or submit a written objection to the settlement.

The notice is generally adequate, but must be modified to instruct class members that they may opt out of the settlement by simply providing their name, without the need to provide their Social Security Number or other identifying information.  Class members should be instructed how to dispute their workweek information if there is an error. And the notice must describe how notice of final judgment will be provided to the class.  (Cal. Rules of Court, Rule 3.771(b).) Regarding appearances at the final fairness hearing, the notice shall be further modified to instruct class members as follows:  

Hearings before the judge overseeing this case will be conducted remotely.  (As of August 15, 2022, the Court’s remote platform is Microsoft Teams.)  Class members who wish to appear 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. 

Turning to the notice procedure, the parties have selected Phoenix Settlement Administrators as the settlement administrator. The administrator will mail the notice packet within 35 calendar days of preliminary approval. Any returned notices will be re-mailed to any forwarding address provided or located using a skip-trace search. These notice procedures are appropriate and are approved, with the modification that the administrator shall update class members’ addresses using the National Change of Address Database prior to the initial mailing.

VIII. CONCLUSION

Plaintiff’s motion for preliminary approval is GRANTED, subject to the modifications to the notice and notice procedure stated above. The final approval hearing shall take place on January 12, 2023 at 1:30 p.m. in Dept. 1.  The following class is preliminarily certified for settlement purposes:     

all hourly, non-exempt employees who are currently or have been employed by Defendant, Silicon Valley Bank, in the State of California and either (i) earned overtime wages and non-discretionary compensation, including incentives, bonuses, and non-cash awards, at any time from April 6, 2016, through January 7, 2022 (the “Class Period”) or (ii) earned overtime wages at any time from April 6, 2019, through January 7, 2022 (the “PAGA Period”).

Prior to final approval, Plaintiff shall lodge any individual settlement agreement she may have executed in connection with her employment with Defendant for the Court’s review.  

The Court will prepare the order.    

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LAW AND MOTION HEARING PROCEDURES

Remote hearings are required. If a party wants to appear in person, please contact Rowena Walker (rwalker@) to make that request.  

  

Effective August 15, 2022, Department 1 will be using Microsoft Teams for all remote hearings, unless otherwise ordered by the court. The Teams link for Department 1 can be found at .  

  

State and local rules prohibit recording of court proceedings without a court order. These rules apply while in court and also while participating in a hearing remotely or listening in on a public access line. 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 must participate remotely.   

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Calendar Line 5

Case Name: Olga Ortmann v. Adecco USA, Inc., et al.

Case No.: 19CV355315

This is an action under the Private Attorneys General Act (“PAGA”), alleging wage and hour violations by Defendants Adecco USA, Inc., Waymo, LLC, and Waymo Auto, LLC.

Before the Court is Adecco’s motion to compel arbitration pursuant to the United States Supreme Court’s recent decision in Viking River Cruises, Inc. v. Moriana (2022) ___U.S.___ [142 S. Ct. 1906, 2022 U.S. LEXIS 2940] (Viking River). Plaintiff opposes the motion on several grounds.

As discussed below, the Court DENIES Adecco’s motion.

I. BACKGROUND

A. Factual

As alleged in the operative complaint, Plaintiff Olga Ortmann was hired by Defendants as an hourly, non-exempt employee who worked in California during July 2018. (First Amended Complaint (“FAC”), ¶ 9.) She was not provided with 30-minute meal periods for each five hour work period due to Defendants’ policy of not scheduling meal periods for each shift; their imposition of so much work on employees—including studying for a required exam at the end of their training—that it was unlikely employees would be able to take breaks; and their lack of a formal policy encouraging employees to take their meal and rest periods. (Id., ¶¶ 10–12.) For the same reasons, Plaintiff was not provided with rest periods of at least 10 minutes for each four hour work period or major fraction thereof. (Id., ¶¶ 13–14.) While Defendants allotted employees two hours of paid time to study for their exams, they failed to pay Plaintiff for one to two hours of additional off-the-clock study time. (Id., ¶¶ 12–15.) Finally, Defendants failed to reimburse Plaintiff for the required use of her cell phone for work purposes. (Id., ¶¶ 19–21.)

B. Procedural

Plaintiff brings a single claim for PAGA penalties against Defendants on behalf of similarly situated employees, alleging violations of several underlying Labor Code provisions. She filed her initial complaint against Adecco and former defendant Google LLC on September 19, 2019. In March 2020, she filed an amendment naming Waymo, LLC and Waymo Auto, LLC as Does 1 and 2. In July 2020, Plaintiff filed the FAC pursuant to a stipulated order, removing certain allegations from the original complaint per the parties’ agreement.

In February 2021, the Court overruled a demurrer by Google and Adecco and granted a motion to quash by the Waymo entities. Google and Adecco filed answers, and the Court granted Google’s motion to bifurcate discovery so that the issue of whether it employed Plaintiff could be addressed first. Google moved for summary judgment on that issue, which the Court granted. Judgement was entered in favor of Google in December 2021, leaving Adecco as the only remaining defendant.

Since this action was filed, Adecco has propounded and responded to discovery, and the parties have participated in several case management conferences and informal discovery conferences with the Court. In April 2022, the Court denied two discovery motions by Plaintiff as untimely and granted Adecco leave to file an amended answer asserting Plaintiff’s execution of an arbitration agreement as a defense. Adecco filed its amended answer on May 2, 2022.

II. MOTION TO COMPEL ARBITRATION

Adecco moves to compel arbitration based on its Voluntary Dispute Resolution and Arbitration Agreement for Consultants/Associates (“Agreement”), attached to the Declaration of Rachel Prentiss as Exhibit D.[6] Plaintiff opposes the motion, arguing that Adecco has waived any right to arbitrate, Adecco fails to present admissible evidence of an enforceable agreement to arbitrate, and the waiver and severability provisions here are different from the ones at issue in Viking River. Plaintiff further contends that even if individual arbitration is compelled per Viking River, she still has standing to bring a representative PAGA claim in court, and that claim should proceed.

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 “shall be enforceable under and subject to the Federal Arbitration Act, 9 U.S.C. § l 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.)

If the court orders arbitration “of a controversy which is an issue involved in [the] action or proceeding pending before [it], the court … shall, upon motion of a party …, stay the action or proceeding until an arbitration is had in accordance with the order to arbitrate or until such earlier time as the court specifies.” (Code Civ. Proc., § 1281.4.)

B. Existence and Scope of Agreement to Arbitrate

As an initial matter, Plaintiff argues that the Declaration of Rachel Prentiss supporting Adecco’s motion is inadmissible because it was executed in New York and states that it was executed “under penalty of perjury under the laws of the United States of America….” Plaintiff is correct: the declaration fails to comply with Code of Civil Procedure section 2015.5 by reciting that the testimony it reflects is true under penalty of perjury under California law.  (See Kulshrestha v. First Union Commercial Corp. (2004) 33 Cal.4th 601, 606 [section 2015.5 “requires some acknowledgement on the face of the declaration that perjured statements might trigger prosecution under California law”].)

But that does not doom Adecco’s motion. As one Court of Appeal recently summarized, 

the moving party bears the burden of producing “prima facie evidence of a written agreement to arbitrate the controversy.” (Rosenthal, supra, 14 Cal.4th at p. 413.)  The moving party “can meet its initial burden by attaching to the [motion or] petition a copy of the arbitration agreement purporting to bear the [opposing party’s] signature.” (Bannister v. Marinidence Opco, LLC (2021) 64 Cal.App.5th 541, 543–544 [279 Cal. Rptr. 3d 112] (Bannister).)  Alternatively, the moving party can meet its burden by setting forth the agreement’s provisions in the motion.  (Condee v. Longwood Management Corp. (2001) 88 Cal.App.4th 215, 219 [105 Cal. Rptr. 2d 597] (Condee); see also Cal. Rules of Court, rule 3.1330 [“The provisions must be stated verbatim or a copy must be physically or electronically attached to the petition and incorporated by reference.”].)  For this step, “it is not necessary to follow the normal procedures of document authentication.” (Condee, at p. 218.)  If the moving party meets its initial prima facie burden and the opposing party does not dispute the existence of the arbitration agreement, then nothing more is required for the moving party to meet its burden of persuasion.

If the moving party meets its initial prima facie burden and the opposing party disputes the agreement, then in the second step, the opposing party bears the burden of producing evidence to challenge the authenticity of the agreement.  (See Condee, supra, 88 Cal.App.4th at p. 219.) The opposing party can do this in several ways. For example, the opposing party may testify under oath or declare under penalty of perjury that the party never saw or does not remember seeing the agreement, or that the party never signed or does not remember signing the agreement.  [Citations.]

If the opposing party meets its burden of producing evidence, then in the third step, the moving party must establish with admissible evidence a valid arbitration agreement between the parties. The burden of proving the agreement by a preponderance of the evidence remains with the moving party. (Rosenthal, supra, 14 Cal.4th at p. 413.)

(Gamboa v. Northeast Community Clinic (2021) 72 Cal.App.5th 158, 165–166.)

Here, Plaintiff does not dispute the existence of the Agreement or that she executed it. (Indeed, she herself initiated arbitration of individual claims against Adecco per the Agreement in 2019.) So Adecco meets its burden to show the existence and scope of the Agreement even without Ms. Prentiss’s declaration.[7]

And despite Plaintiff’s argument, the same is true concerning the application of the FAA. Regardless of whether admissible evidence shows the Agreement involves interstate commerce, the Agreement itself provides that it is subject to the FAA. (See Victrola 89, LLC v. Jaman Properties 8 LLC (2020) 46 Cal.App.5th 337, 355 [“Victrola … contends the FAA is inapplicable because the Jaman Parties failed to submit evidence that the parties’ dealings involved interstate commerce. But the presence of interstate commerce is not the only manner under which the FAA may apply. … [T]he parties may also voluntarily elect to have the FAA govern enforcement of the Agreement, as they did here.”].) Again, because Plaintiff does not dispute the authenticity of the Agreement, Ms. Prentiss’s declaration is unnecessary.[8]

Finally, there is no dispute that the Agreement covers Plaintiff’s employment- related claims as follows:

… the Company and Employee agree that any and all disputes, claims or controversies arising out of or relating to this Agreement, the employment relationship between the Parties, or the termination of the employment relationship (collectively, “Claims” or individually, “Claim”), shall be resolved by binding arbitration in accordance with the Employment Arbitration Rules of the American Arbitration Association then in effect…. The agreement to arbitrate includes any Claims that the Company may have against Employee, and/or that Employee may have against the Company…. This Agreement shall be enforceable under and subject to the Federal Arbitration Act, 9 U.S.C. § l et seq. and shall survive after the employment relationship terminates.

BY SIGNING THIS AGREEMENT, THE PARTIES HEREBY WAIVE THEIR RIGHT TO HAVE ANY CLAIM COVERED BY THE ARBITRATION OBLIGATIONS IN THIS AGREEMENT DECIDED BY A JUDGE OR JURY IN A COURT.

(Agreement at ¶ 3, emphasis original.)

The Agreement also includes waivers of class/collective and representative PAGA claims:

7. EXCEPT FOR YOUR RIGHTS UNDER PARAGRAPH 4, BY SIGNING THIS AGREEMENT, THE PARTIES AGREE THAT EACH MAY BRING CLAIMS AGAINST THE OTHER ONLY IN THEIR INDIVIDUAL CAPACITIES AND NOT AS A PLAINTIFF, CLASS, OR COLLECTIVE ACTION MEMBER IN ANY PURPORTED CLASS AND/OR COLLECTIVE ACTION PROCEEDING.

8. FURTHERMORE, BY SIGNING THIS AGREEMENT, THE PARTIES AGREE THAT EACH MAY BRING CLAIMS AGAINST THE OTHER ONLY IN THEIR INDIVIDUAL CAPACITIES AND NOT IN ANY REPRESENTATIVE PROCEEDING UNDER ANY PRIVATE ATTORNEY GENERAL STATUTE (“PAGA CLAIM”), UNLESS APPLICABLE LAW REQUIRES OTHERWISE. IF THE PRECEDING SENTENCE IS DETERMINED TO BE UNENFORCEABLE, THEN THE PAGA CLAIM SHALL BE LITIGATED IN A CIVIL COURT OF COMPETENT JURISDICTION AND ALL REMAINING CLAIMS WILL PROCEED IN ARBITRATION.

(Agreement at ¶¶ 7–8, emphasis original.)

C. Waiver of Right to Arbitrate

Plaintiff contends that Adecco has waived any right to compel arbitration of her PAGA claim by litigating the claim in court.

All case law on the subject of waiver is unequivocal: “ “Waiver always rests upon intent. Waiver is the intentional relinquishment of a known right after knowledge of the facts. [Citations]. The burden, moreover, is on the party claiming a waiver of a right to prove it by clear and convincing evidence that does not leave the matter to speculation, and ‘doubtful cases will be decided against a waiver.’ ” (City of Ukiah v. Fones (1966) 64 Cal. 2d 104, 107-108 …; Grubb & Ellis Co. v. Bello (1993) 19 Cal. App. 4th 231, 236 ….)

(DRG/Beverly Hills, Ltd. v. Chopstix Dim Sum Cafe & Takeout III, Ltd. (1994) 30 Cal.App.4th 54, 60.) “Whether a waiver has been established is measured by the circumstances existing at the time the waiver is exercised.” (Kec v. Superior Court (2020) 51 Cal.App.5th 972, 980 (Kec).)

“[T]he test for determining waiver of the right to arbitrate is the same,” or at least similar, “under the FAA and the CAA.” (Zamora v. Lehman (2010) 186 Cal.App.4th 1, 11 (Zamora).) Both federal and California law “reflect[] a strong policy favoring arbitration agreements and require[] close judicial scrutiny of waiver claims.” (St. Agnes Medical Center v. PacifiCare of California (2003) 31 Cal.4th 1187, 1195 (St. Agnes).) “[W]aivers are not to be lightly inferred and the party seeking to establish a waiver bears a heavy burden of proof.” (Ibid.) A waiver generally does not occur where the arbitrable issues have not been litigated to judgment, but—at least under California law—can occur even in the absence of judicial litigation of the merits of arbitrable issues if prejudice is demonstrated. (Id., at pp. 1201, 1203.)

The following factors are relevant in deciding whether a party’s conduct constitutes a waiver of arbitration:

(1) whether the party’s actions are inconsistent with the right to arbitrate; (2) whether the litigation machinery has been substantially invoked and the parties were well into preparation of a lawsuit before the party notified the opposing party of an intent to arbitrate; (3) whether a party either requested arbitration enforcement close to the trial date or delayed for a long period before seeking a stay; (4) whether a defendant seeking arbitration filed a counterclaim without asking for a stay of the proceedings; (5) whether important intervening steps [e.g., taking advantage of judicial discovery procedures not available in arbitration] had taken place; and (6) whether the delay affected, misled, or prejudiced the opposing party.

(St. Agnes, supra, 31 Cal.4th at pp. 1195–1196, internal quotations omitted.) The multifactor test is not “a mechanical process in which each factor is assessed and the side with the greater number of favorable factors prevails,” nor is the list of factors exclusive: rather, the factors reflect the principles that should guide courts in determining whether a party has waived its right to demand arbitration. (Zamora, supra, 186 Cal.App.4th at p. 15, internal quotation marks and citation omitted.)[9]

“Our Supreme Court held that futility may excuse a delay in seeking arbitration.” (Bower v. Inter-Con Security Systems, Inc. (2014) 232 Cal.App.4th 1035, 1048, citing Iskanian v. CLS Transportation Los Angeles, LLC (2014) 59 Cal.4th 348 (Iskanian), overruled on other grounds by Viking River; see also Oregel v. PacPizza, LLC (2015) 237 Cal.App.4th 342, 356 [“a court may find a party has not acted inconsistently with its right to arbitrate if the party delayed seeking to enforce an arbitration agreement during a time when that agreement would have been considered unenforceable under existing law”].) “[F]utility as grounds for delaying arbitration is implicit in the general waiver principles” endorsed by the California Supreme Court, namely, “whether the party asserting arbitration has acted inconsistently with the right to arbitrate (see St. Agnes Medical Center, supra, 31 Cal.4th at p. 1196) or whether a delay was ‘unreasonable’ (Lewis v. Fletcher Jones Motor Cars, Inc. (2012) 205 Cal.App.4th 436, 446…).” (Iskanian, supra, 59 Cal.4th at p. 376.)

Plaintiff contends that, even prior to Viking River, Adecco has always had the right to compel arbitration on a representative basis. So Adecco should not be allowed to decide not to arbitrate in that less favorable context, only to seek arbitration when the legal landscape has changed to make it more appealing. But the Agreement does not allow for representative arbitration. To the contrary, it provides that a party cannot bring a representative PAGA claim unless applicable law requires otherwise, and if this waiver is unenforceable, then any PAGA claim will be litigated in court. Prior to Viking River, the PAGA waiver was unenforceable under Iskanian, and no aspect of the PAGA claim was subject to arbitration. So it was “appropriate to bifurcate the claims, with individual [non-PAGA] claims going to arbitration and the representative PAGA claim to litigation,” as contemplated by Iskanian (59 Cal.4th at pp. 391–392) and by the Agreement. And that is exactly how the parties proceeded here.

Considering these circumstances and the others raised by Plaintiff, the Court finds that futility excused Adecco’s delay in seeking arbitration here. As already explained, considering the state of the law at the time of the purported waiver, Adecco has not acted inconsistently with any right to arbitrate and its delay was not unreasonable. While some litigation has occurred here, including the determination of a demurrer Adecco brought jointly with Google and the exchange of some discovery, there is no indication that these procedures are inconsistent with what would have occurred in arbitration, and more substantive proceedings have focused on Google. And Iskanian held that where arbitration is “foreclosed by existing law, the mere fact that the parties then proceed to engage in various forms of pretrial litigation does not compel the conclusion that the party has waived its right to arbitrate when a later change in the law permits arbitration.” (Iskanian, supra, 59 Cal.4th at pp. 377–378.) Notably, in Iskanian, litigation in court had been far more extensive than it was here, with the parties conducting substantial discovery and litigating a motion for class certification, which was granted. (See id. at p. 376–377.) But Iskanian held there was no waiver under those circumstances due to futility.

So too here. Plaintiff fails to show that Adecco has waived any right to compel arbitration.

D. Application of the Agreement in Light of Viking River

Adecco has established that Plaintiff signed the Agreement, which is subject to the FAA and generally covers employment claims, and Plaintiff fails to show that Adecco waived any right to compel arbitration pursuant to Viking River. So far, so good for Adecco. But now, the Court must apply Viking River to the specific language of the parties’ Agreement here.

1. Relevant Language of the Agreement

As mentioned above, in addition to generally providing that employment claims are subject to arbitration, the Agreement sets forth a paragraph purporting to waive PAGA claims and specifically addressing what will happen to such claims in the event the waiver is unenforceable:

8. FURTHERMORE, BY SIGNING THIS AGREEMENT, THE PARTIES AGREE THAT EACH MAY BRING CLAIMS AGAINST THE OTHER ONLY IN THEIR INDIVIDUAL CAPACITIES AND NOT IN ANY REPRESENTATIVE PROCEEDING UNDER ANY PRIVATE ATTORNEY GENERAL STATUTE (“PAGA CLAIM”), UNLESS APPLICABLE LAW REQUIRES OTHERWISE. IF THE PRECEDING SENTENCE IS DETERMINED TO BE UNENFORCEABLE, THEN THE PAGA CLAIM SHALL BE LITIGATED IN A CIVIL COURT OF COMPETENT JURISDICTION AND ALL REMAINING CLAIMS WILL PROCEED IN ARBITRATION.

(Agreement at ¶ 8, emphasis original.)

The Agreement also contains a more general severability provision:

13. If any provision(s) of this Dispute Resolution Agreement is declared overbroad, invalid or unenforceable, such provision(s) shall be severed from this Dispute Resolution Agreement and the remaining provisions of this Dispute Resolution Agreement shall remain in full force and effect and shall be construed in a fashion which gives meaning to all of the other terms of this Dispute Resolution Agreement.

(Agreement at ¶ 13.)

2. The Viking River Decision

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.

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.[10] 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.)

3. Discussion

As urged by Plaintiff, the Agreement here is different. Rather than directing that a “portion” of the waiver be “enforced in arbitration” if the provision is invalid in whole or in part, it simply provides that the PAGA claim “shall be litigated in [] civil court….”[11] And the general severability provision speaks of severing entire “provision(s)” from the Agreement here, not parts or portions of provisions.

Adecco urges that the waiver distinguishes between “individual” and “representative” claims, evincing “the parties’ intent to arbitrate claims on an individual basis only.” True enough. But as already discussed, Viking River held that Iskanian is not preempted by the FAA to the extent that it holds waivers of representative PAGA claims are invalid. So despite the Agreement’s intent, the waiver of representative claims here is invalid. And in this situation, the Agreement clearly and simply provides that “the PAGA claim shall be litigated in a civil court of competent jurisdiction and all remaining claims will proceed in arbitration.” There is no distinction between an “individual” and a “representative” PAGA claim in this regard.

We interpret [an] arbitration agreement as we would any other contract. The fundamental rule is that interpretation of any contract is governed by the mutual intent of the parties at the time they form the contract. The parties’ intent is found, if possible, solely in the contract’s written provisions. The clear and explicit meaning of these provisions, interpreted in their ordinary and popular sense, unless used by the parties in a technical sense or a special meaning is given to them by usage, controls judicial interpretation. …

(Kec, supra, 51 Cal.App.5th at p. 978, internal citations, quotations, and other notations omitted.)

By the Agreement’s plain terms, the PAGA claim must proceed in court. (See Mohamed v. Uber Techs., Inc. (9th Cir. 2016) 848 F.3d 1201, 1213–1214 [PAGA claim must be litigated in court where agreement provided that “in any case in which a civil court of competent jurisdiction finds the Private Attorney General Waiver is unenforceable…, such private attorney general claim must be litigated in a civil court of competent jurisdiction”]; Cabrera v. CVS Rx Servs. (N.D.Cal. Mar. 16, 2018, No. C 17-05803 WHA) 2018 U.S.Dist.LEXIS 43681, at *12–13 [“As the arbitration agreements clearly state, to the extent that the class action waiver is found unenforceable as to any PAGA action, that action ‘must be litigated in a civil court of competent jurisdiction.’ Accordingly, pursuant to the terms of the parties’ agreement, plaintiffs’ representative PAGA claim for civil penalties must remain pending in this forum.”]; Shepardson v. Adecco USA, Inc. (N.D.Cal. Apr. 5, 2016, No. 15-cv-05102-EMC) 2016 U.S.Dist.LEXIS 46754, at *18–19 [“The PAGA waiver in the Agreement is clear that in the event that the Court were to find the first sentence of Paragraph 8 not enforceable, ‘then the PAGA claim shall be litigated in a civil court of competent jurisdiction and all remaining claims will proceed in arbitration.’ … [] … Therefore, pursuant to the Agreement’s terms, Plaintiff's representative PAGA claims are severable from the Agreement and will remain before this Court.”].)

III. CONCLUSION

For the reasons discussed above, the Court DENIES Adecco’s motion.

The Court will prepare the order.    

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LAW AND MOTION HEARING PROCEDURES

Remote hearings are required. If a party wants to appear in person, please contact Rowena Walker (rwalker@) to make that request.  

  

Effective August 15, 2022, Department 1 will be using Microsoft Teams for all remote hearings, unless otherwise ordered by the court. The Teams link for Department 1 can be found at .  

  

State and local rules prohibit recording of court proceedings without a court order. These rules apply while in court and also while participating in a hearing remotely or listening in on a public access line. 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 must participate remotely.   

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Calendar Line 6

Case Name: Foresite Capital Fund IV, L.P. v. GenapSys, Inc., et al.

Case No.: 20CV376305

These cross-actions arise from a dispute between Defendant and Cross-Complainant GenapSys, Inc., a DNA sequencing company, and its investors, Cross-Defendant Foresite Capital Management, LLC (“FCM”) and Plaintiff and Cross-Defendant Foresite Capital Fund IV, LP (“FCF”).[12] Broadly speaking, FCF alleges that it was fraudulently induced to invest in GenapSys, and GenapSys alleges that FCF, FCM, and Cross-Defendant James Tananbaum (collectively, “Cross-Defendants” or the “Foresite Parties”) misappropriated its trade secrets and started two competing companies.

Before the Court are the following motions: (1) Defendant Hesaam Esfandyarpour, Ph.D.’s motion to stay pending resolution of bankruptcy proceeding; (2) Dr. Esfandyarpour’s motion to strike portions of the operative Second Amended Complaint (“SAC”); and (3) Dr. Esfandyarpour’s motion to seal portions of the SAC. All of three of these motions are opposed.

As discussed below, the Court DENIES Dr. Esfandyarpour’s motion to stay; DENIES his motion to strike in large part; and DENIES his motion to seal.

 

I. BACKGROUND

On June 13, 2022, Dr. Esfandyarpour, then represented by Baker & McKenzie LLP, filed a motion to strike portions of the SAC along with a motion to seal portions of that pleading. These motions were scheduled to be heard on August 11.

On July 11, 2022, GenapSys filed a voluntary petition for relief under chapter 11 of title 11 of the United States Code (11 U.S.C. §§ 101–1532) in the United States Bankruptcy Court for the District of Delaware. It also filed a notice of bankruptcy stay in this Court.

On August 1, 2022, Dr. Esfandyarpour filed a motion to stay the litigation here as to all parties, noticing a hearing date of October 6, 2022. Following a case management conference, the Court advanced the hearing to September 8 and set a briefing schedule. The hearings on Dr. Esfandyarpour’s other two motions were also reset to September 8.

Meanwhile, the Court granted Baker & McKenzie’s motion to be relieved as counsel for Dr. Esfandyarpour on August 25, 2022. On September 1, the Court granted Dr. Esfandyarpour’s ex parte application to continue the hearings on his pending motions to September 29. Via his new counsel, Dr. Esfandyarpour filed reply briefs in support of his motion to stay and motion to strike (but not his motion to seal) on September 22.

II. MOTION TO STAY

When a bankruptcy case is filed, a stay goes into effect by operation of law that prevents creditors and other parties from taking most actions against property of the bankruptcy estate, the debtor, and the debtor’s property (subject to specific exemptions).  (See 11 U.S.C. § 362.)  This prohibition continues until a bankruptcy court order lifting the stay has been entered or stay expires.  (See ibid.)

Clearly, this matter must be stayed as to GenapSys due to its bankruptcy. Dr. Esfandyarpour moves to extend the automatic stay to all parties and, alternatively, for a stay pursuant to the Court’s inherent authority.

A. The Automatic Stay

 “The scope of protections embodied in the automatic stay is quite broad, and serves as one of the most important protections in bankruptcy law.” (Eskanos & Adler, P.C. v. Leetien (9th Cir. 2002) 309 F.3d 1210, 1214.) “[A]ctions taken in violation of the automatic stay are void.” (Gruntz v. County of Los Angeles (In re Gruntz) (9th Cir. 2000) 202 F.3d 1074, 1082.)

The automatic stay has two broad purposes.  First, it provides debtors with protection from hungry creditors by giving them a “breathing spell” against all harassment, collection efforts and foreclosure actions.  Second, it protects the debtor’s creditors by preventing a race for the debtor’s assets.  The automatic stay prevents piecemeal diminution of the debtor’s estate.

(Shaoxing County Huayue Import & Export v. Bhaumik (2011) 191 Cal.App.4th 1189, 1196, internal citations and quotation marks omitted.)

Significantly, “the automatic stay of judicial proceedings against a debtor in bankruptcy does not apply to nondebtor codefendants.” (Cross v. Cooper (2011) 197 Cal.App.4th 357, 365, fn. 2, 127 Cal.Rptr.3d 903 (Cross); accord, Danko v. O'Reilly (2014) 232 Cal.App.4th 732, 748, 181 Cal.Rptr.3d 304 (Danko) [“ ‘automatic stay does not ... apply to nondebtor entities such as ... codefendants’ ”].) As a general rule, therefore, because “the automatic stay protects only the debtor,” the “[b]ankruptcy of one defendant in a multidefendant case does not stay the case as to the remaining defendants.” (March et al., Cal. Practice Guide: Bankruptcy (The Rutter Group 2016) ¶ 8:100, p. 8(I)-8, ¶ 8:125, p. 8(I)-11 [citing federal authorities].)

 

(Higgins v. Superior Court (2017) 15 Cal.App.5th 973, 979–980, italics original.)

 B. Discussion

Dr. Esfandyarpour argues that “four exceptions to the rule on the application of the automatic stay to nondebtors” apply here:

(1) the claims stated by Foresite, and the relief sought in the litigation, and as related to Dr. Esfandyarpour directly impact the assets of the debtor, GenapSys, including, for example, both the rescission of Foresite’s investment in GenapSys and disgorgement of its profits, benefits and gains; (2) the allegations against Dr. Esfandyarpour are inextricably intertwined with the claims against GenapSys, as he is both entitled to indemnification from and may bind the debtor; (3) GenapSys for these and other reasons is an indispensable party to the Foresite litigation and it cannot proceed with prejudicing both Dr. Esfandyarpour and GenapSys; and, (4) even if debtor is not found to be an indispensable party, in the interest of judicial economy and fairness to the parties the Court has, and should exercise, the authority to stay the proceedings.

FCF opposes Dr. Esfandyarpour’s motion, urging that only the bankruptcy court has the jurisdiction to extend the automatic stay to non-debtors, and extending the stay to Dr. Esfandyarpour is not warranted in any event.

1. Jurisdiction to Extend the Automatic Stay Under the “Unusual Circumstances” Doctrine

While characterized as separate exceptions to the general rule that the automatic stay does not apply to non-debtors, Dr. Esfandyarpour’s first two arguments appear to rely on the so-called “unusual circumstances” doctrine.[13] That doctrine was developed by the Fourth Circuit in A.H. Robins Co. v. Piccinin (4th Cir. 1986) 788 F.2d 994 (Piccinin).

Piccinin held that the automatic stay may be extended if unusual circumstances make the interests of the debtor and the non-debtor defendant inextricably interwoven. 788 F.2d at 998-1004 (affirming stay of actions against debtor’s officers under a combination of § 362(a), § 105(a), and the court’s inherent equitable powers); see also S.I. Acquisition, Inc. v. Eastway Delivery Serv., Inc. (In re S.I. Acquisition, Inc.), 817 F.2d 1142, 1147-50 (5th Cir. 1987) (extending the § 362(a) automatic stay to action against debtor’s alleged alter egos). …

(Solidus Networks, Inc. v. Excel Innovations, Inc. (In re Excel Innovations, Inc.) (9th Cir. 2007) 502 F.3d 1086, 1096 (Solidus Networks).) Critically, however,

stays under the doctrine, “although referred to as extensions of the automatic stay, were in fact injunctions issued by the bankruptcy court after hearing and the establishment of unusual need to take this action to protect the administration of the bankruptcy estate.” Chugach Forest Prods., 23 F.3d at 247 n.6 (quoting Patton v. Bearden, 8 F.3d 343, 349 (6th Cir. 1993)).

(Solidus Networks, supra, 502 F.3d at p. 1096 [noting that “Piccinin itself applied the usual preliminary injunction standard in affirming the stay”].) Thus, numerous authorities hold that a trial court

“does not have the jurisdiction to extend the stay to a non-debtor party.” Placido v. Prudential Ins. Co. of Am., 2010 U.S. Dist. LEXIS 12147, at *2-3 (N.D. Cal. Jan. 21, 2010) (“In order to apply the automatic stay outlined in 11 U.S.C. § 362 to a non-debtor party, the bankruptcy court must issue an extension of the stay under its jurisdiction.”) (citing Boucher v. Shaw, 572 F.3d 1087, 1093 (9th Cir. 2009)); see also Campo v. Am. Corrective Counseling Serv., 2009 U.S. Dist. LEXIS 23036, at *10 (N.D. Cal. Mar. 12, 2009) (“A determination concerning whether the automatic stay under § 362(a) should be extended to non-debtor parties is a determination to be made by a bankruptcy court.”) (citing In re Chugach Forest Products, Inc., 23 F.3d 241, 247 (9th Cir. 1994); A.H. Robins Co., Inc. v. Piccinin, 788 F.2d 994, 999 (4th Cir. 1986)).

[¶] … [¶]

[T]he bankruptcy court would first need to extend the automatic stay under its equity jurisdiction. Such extensions, although referred to as extensions of the automatic stay, are in fact injunctions issued by the bankruptcy court after hearing and the establishment of unusual need to take this action to protect the administration of the bankruptcy estate.

[Boucher v. Shaw (9th Cir. 2009) 572 F.3d 1087,] 1093 n.3 (internal quotation marks and citation omitted) (emphasis added).

(Totten v. Kellogg Brown & Root, LLC (C.D.Cal. 2016) 152 F. Supp. 3d 1243, 1267–1268.) “Bankruptcy courts are in accord.” (Id. at p. 1268 [citing cases]; see also In re NIR W. Coast, Inc. (Bankr.E.D.Cal. Jan. 4, 2021, No. 20-25090-B-11) 2021 Bankr. LEXIS 14, at *9.)

Per these authorities, the Court does not have jurisdiction to extend the bankruptcy stay to Dr. Esfandyarpour under the “unusual circumstances” doctrine.[14]

2. Indispensable Party

Dr. Esfandyarpour further contends that the automatic stay “may be extended to nonbankrupt co-defendants if the bankrupt defendant is a necessary or indispensable party.” He cites In re James Wilson Assocs. (7th Cir. 1992) 965 F.2d 160, 170, which states in dicta that there “may” be an exception to the rule that the automatic stay only applies to the debtor where the debtor is an indispensable party to the litigation. The Court is not aware of any authority applying this exception as a standalone doctrine: rather, “the ‘indispensable party’ standard appears to have been subsumed by the first ‘unusual circumstance’ exception.” (Rosen v. Urban Commons, LLC (C.D.Cal. July 23, 2021, No. SA CV 20-01973-JLS (DFMx)) 2021 U.S.Dist.LEXIS 144239, at *5, fn. 1; see also HML Holdings, LLC v. Romero (S.D.Cal. Oct. 11, 2021, No. 21-cv-00380-BAS-BLM) 2021 U.S.Dist.LEXIS 196311, at *4–5 [analyzing the two exceptions together] (HML Holdings).) And as with the “unusual circumstance” exception, it would seem that the bankruptcy court would need to be the place to seek an extension of automatic stay. (See HML Holdings, supra, 2021 U.S.Dist.LEXIS 196311, at *5.)

Ultimately, Code of Civil Procedure section 389 establishes the procedure for addressing indispensable parties in California. It provides that where a necessary party cannot be joined, the trial court, considering a number of factors, “shall determine whether in equity and good conscience the action should proceed among the parties before it, or should be dismissed without prejudice, the absent person being thus regarded as indispensable.”  (Code Civ. Proc., § 389, subd. (b), italics added; see Dreamweaver Andalusians, LLC v. Prudential Ins. Co. of America (2015) 234 Cal.App.4th 1168, 1176-1177 [trial court has “substantial discretion” in deciding whether to dismiss an action under this statute].) But the law is clear that joint tortfeasors are not necessary parties. (See Countrywide Home Loans, Inc. v. Superior Court (HP Lemona II) (1999) 69 Cal.App.4th 785, 796–798.)

Dr. Esfandyarpour’s vague argument that the claims in the action are “intertwined” does not show that GenapSys is a necessary party to the claims against Dr. Esfandyarpour, nor does his assertion that he is “entitled to indemnification from GenapSys and [is] able to bind the company in the litigation”—which is unsupported by any evidence. (See Solidus Networks, supra, 502 F.3d at p. 1098 [vacating injunction staying proceedings between non-bankrupt parties where “[t]he bankruptcy court made no findings on whether Hoffman has an indemnity agreement with Excel,” or what the agreement covers, but “merely noted that Hoffman might state a ‘defense’ of indemnification”].) And while GenapSys may have critical documents, Dr. Esfandyarpour does not explain why they could not be obtained through discovery or how this makes GenapSys a necessary party. Dr. Esfandyarpour does not provide any evidence or additional reasoning to support his “indispensable party” argument on reply.

In sum, Dr. Esfandyarpour does not show that GenapSys is a necessary or indispensable party to the claims against him.

3. Inherent Authority

That leaves the Court’s inherent authority. A court ordinarily has inherent power, in its discretion, to stay proceedings when a stay will accommodate the ends of justice.  (OTO, L.L.C. v. Kho (2019) 8 Cal.5th 111, 141.)  “As the court in Landis v. North American Co. (1936) 299 U.S. 248, 254, 57 S.Ct. 163, 81 L.Ed. 153 [(Landis)] explained, ‘the power to stay proceedings is incidental to the power inherent in every court to control the disposition of the causes on its docket with economy of time and effort for itself, for counsel, and for litigants.’ ”  (Ibid.)  

It appears to the Court that, as urged by FCF, the “claims against GenapSys will be handled in the liquidation in the Bankruptcy Court, while Foresite’s claims against Esfandyarpour will [need to] go forward” here at some point. Dr. Esfandyarpour does not explain why it would be more efficient to stay these proceedings immediately and indefinitely, as opposed to informally coordinating with the bankruptcy proceedings. And the Court sees no reason why the claims against Dr. Esfandyarpour cannot proceed. The Court will not enter a stay pursuant to its inherent authority. (See Morici v. Hashfast Techs. LLC (N.D.Cal. Oct. 6, 2014, No. 5:14-cv-00087 EJD) 2014 U.S.Dist.LEXIS 142107, at *6–7 [declining to stay fraud claims against individual corporate officers pending corporation’s bankruptcy proceedings: “[T]he claims against the Individual Defendants are unique to them. While there may be some factual overlap between those claims and the ones against Hashfast, the Individual Defendants have not persuasively explained why the claims specific to them cannot proceed on an earlier track in an efficient way.”].)

On reply, Dr. Esfandyarpour states that “we understand the bankruptcy process will be completed shortly.” But he provides no evidence to support this statement, and no indication of when, specifically, the bankruptcy is expected to conclude. Again, the Court expects that this matter can be informally coordinated with the bankruptcy proceedings and sees no reason to completely arrest its progress now—particularly if the bankruptcy will be resolved soon.

C. Conclusion

The Court DENIES Dr. Esfandyarpour’s motion to stay.

III. MOTION TO STRIKE

Dr. Esfandyarpour moves to strike from the SAC (1) certain material that he contends is “gratuitous, inflammatory, do[es] not advance any of Plaintiff’s claims or its defenses …, and serve[s] no legitimate purpose other than to embarrass or harass,” as well as (2) allegations relating to remedies “that are contradictory, inconsistent with the law, or unavailable.” FCF opposes the motion to strike in both respects.

A. Legal Standard

“The court may, … upon terms it deems proper,” strike out “irrelevant, false or improper” matters from a complaint.  (See Code Civ. Proc, § 436, subd. (a).)  Irrelevant matter includes (1) an allegation that is not essential to the statement of a claim or defense, (2) an allegation that is neither pertinent to nor supported by an otherwise sufficient claim or defense, and (3) a demand for judgment requesting relief not supported by the allegations of the complaint or cross-complaint.  (See id., § 431.10, subds. (b), (c).)

The motion “is traditionally used to reach pleading defects that are not subject to demurrer” because they impact only a portion of a cause of action.  (CLD Construction, Inc. v. City of San Ramon (2004) 120 Cal.App.4th 1141, 1146.)  The motion is properly employed in this context “when a substantive defect is clear from the face of a complaint, such as a violation of the applicable statute of limitations or a purported claim of right which is legally invalid,” and “is widely used to challenge portions of causes of action seeking punitive damages.”  (PH II, Inc. v. Superior Court (1995) 33 Cal.App.4th 1680, 1682–1683 (PH II).)  However, “such use of the motion to strike should be cautious and sparing.”  (Id. at p. 1683.)  The motion does not “creat[e] a procedural ‘line item veto’ for the civil defendant.”  (Ibid.)     

 

B. Discussion

Dr. Esfandyarpour moves to strike the following portions of the SAC as “inflammatory” and unnecessary: paragraphs 1 (p. 2:8–9), 6 (p. 4:8–11), 7 (p. 5:14-15), 25 (p. 9:24), 51 (p. 18: 9–12), 52 (p. 18:15), 53 (p. 18:24), 59 (p. 21: 12), 78 (p. 26:15), 79 (p. 26:25), 80 (p. 27:6, 9), 84 (p. 28:17), 89 (p. 30:2), and 90 (p. 30:6).

Having reviewed these portions of the SAC, the Court largely declines to strike them. Although these allegations characterize actions described more specifically elsewhere in the SAC and are perhaps not strictly necessary, they are supported by specific factual allegations and the Court does not view them as improperly “inflammatory.” The one exception is the allegation at paragraph 7, which crosses the line into a personal insult. The Court will strike this allegation. (See Neilson v. Union Bank of Cal., N.A. (C.D.Cal. 2003) 290 F.Supp.2d 1101, 1153 [striking allegation that the defendant’s motive was “GREED”].)

As for the damages allegations, Dr. Esfandyarpour contends that it is improper for FCF to seek both rescission and damages in connection with its fraud claims because these are inconsistent remedies. But “a party may plead in the alternative and may make inconsistent allegations” in his or her complaint. (Adams v. Paul (1995) 11 Cal.4th 583, 593.) “The election of remedies doctrine states that accepting an actual benefit from an alternative theory that renders continued pursuit of the alternative unfair constitutes an election.” (SCLC v. Al Malaikah Auditorium Co. (1991) 230 Cal.App.3d 207, 223.) Otherwise, a plaintiff is “entitled to change alternative remedies until satisfaction of judgment, or application of res judicata or estoppel, vindicates one of the inconsistent rights.” (Ibid. [plaintiff could proceed to trial for damages despite obtaining a preliminary injunction based on specific performance].)

Dr. Esfandyarpour provides no authority suggesting that a party may not assert inconsistent alternative remedies at the pleading stage. On reply, Dr. Esfandyarpour affirms that “a party can seek inconsistent remedies at the pleading stage,” but contends that FCF elected recession as a remedy because this was the only remedy it alleged in its original and first amended complaints. Again, Dr. Esfandyarpour provides no authority suggesting that this constitutes an election of remedies.

The Court accordingly declines to strike FCF’s damages allegations.

C. Conclusion

Dr. Esfandyarpour’s motion to strike is GRANTED IN PART as to the following portion of the SAC, without leave to amend: “It was a calculated effort … to mislead Foresite.” (SAC, ¶ 7 (p. 5:14-15).)

The motion to strike is otherwise DENIED.

IV. MOTION TO SEAL

A. Legal Standard

“The court may order that a record be filed under seal only if it expressly finds facts that establish: (1) There exists an overriding interest that overcomes the right of public access to the record; (2) The overriding interest supports sealing the record; (3) A substantial probability exists that the overriding interest will be prejudiced if the record is not sealed; (4) The proposed sealing is narrowly tailored; and (5) No less restrictive means exist to achieve the overriding interest.”  (Cal. Rules of Court, rule 2.550(d).)  Pleadings, in particular, should be open to public inspection “as a general rule,” although they may be filed under seal in appropriate circumstances.  (Mercury Interactive Corp. v. Klein (2007) 158 Cal.App.4th 60, 104, fn. 35.)         

  “Courts have found that, under appropriate circumstances, various statutory privileges, trade secrets, and privacy interests, when properly asserted and not waived, may constitute overriding interests.”  (In re Providian Credit Card Cases (2002) 96 Cal.App.4th 292, 298, fn. 3 (Providian).)  “[A] binding contractual agreement not to disclose” may suffice.  (Huffy Corp. v. Superior Court (2003) 112 Cal.App.4th 97, 107.)  In addition, confidential matters relating to the business operations of a party may be sealed where public revelation of the information would interfere with the party’s ability to effectively compete in the marketplace.  (See Universal City Studios, Inc. v. Superior Court (2003) 110 Cal.App.4th 1273, 1285–1286 (Universal).)       

 

Where some material within a document warrants sealing, but other material does not, the document should be edited or redacted if possible, to accommodate both the moving party’s overriding interest and the strong presumption in favor of public access.  (Cal. Rules of Court, rule 2.550(d)(4), (5).)  In such a case, the moving party should take a line-by-line approach to the information in the document, rather than framing the issue to the court on an all-or-nothing basis.  (Providian, supra, 96 Cal.App.4th at p. 309.)    

B. Analysis

Dr. Esfandyarpour moves to file under seal (1) portions of the SAC that were filed under seal in prior versions of the complaint pursuant to applications by GenapSys, (2) additional portions of the SAC that reference, rely upon or reveal assertedly confidential information of GenapSys, and (3) “scandalous” allegations of the sort addressed by Dr. Esfandyarpour’s motion to strike.

FCF opposes the motion, urging that GenapSys filed the unredacted SAC in its bankruptcy case in Delaware. The Court takes judicial notice of the docket in that matter, which reflects that the SAC remains publicly available and no motion to seal it has been filed there. So the motion to seal will be denied as to all assertedly confidential GenapSys material. (See , Inc. v. Goldman Sachs Group, Inc. (2014) 231 Cal.App.4th 471, 507 [denying motion to seal publicly known information]; Universal, supra, 110 Cal.App.4th at pp. 1285–1286 [request to seal denied because financial information was publicly filed in another case].)

The motion to seal will also be denied as to the “scandalous” material—which Dr. Esfandyarpour quotes in his own publicly filed reply supporting his motion to strike. “The mere fact that the production of records may lead to a litigant’s embarrassment, incrimination, or exposure to further litigation will not, without more, compel the court to seal its records.” (Kamakana v. City & County of Honolulu (9th Cir. 2006) 447 F.3d 1172, 1179.)  While exposing a victim or witness to embarrassment so “extreme” that it would be traumatizing may constitute an overriding interest (see Universal, supra, 110 Cal.App.4th at p. 1281 [citing cases]), that is not the case here.

C. Conclusion

The Court DENIES Dr. Esfandyarpour’s motion to seal the SAC.

The Court will prepare the order.

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[1] Plaintiff further notes that an “Employee Acknowledgement” at the end of Annexure B states,

a. I accept employment with HCL America, Inc. (“HCL America”) pursuant to the terms set forth in this Agreement.

b. I understand I have the right to consult with an attorney independent from HCL America regarding the terms of this Agreement. I have been given the opportunity to do so, and i have done so to the degree i believe necessary.

[¶] … [¶]

I agree to the terms of the Agreement and freely make the statements set forth above.

This acknowledgement is presented before the DRA, and also does not reference the DRA.

[2] See Viking River, supra, 142 S.Ct. at pp. 1921–1922 (disagreeing “that Iskanian’s prohibition on PAGA waivers is inconsistent with the FAA because PAGA creates an intrinsically representational form of action”; the FAA “do[es] not mandate the enforcement of waivers of representative capacity as a categorical rule”), p. 1925 (“Under our holding in this case, [non-individual PAGA] claims may not be dismissed simply because they are ‘representative.’ Iskanian’s rule remains valid to that extent.”).

[3] The DRA provides at paragraph 5(c):

There will be no right or authority for any dispute to be brought, heard or arbitrated as a private attorney general representative action (“Private Attorney General Waiver”). The Private Attorney General 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 or regarding others. The Private Attorney General Waiver shall be severable from this Agreement in any case in which there is a final judicial determination that the Private Attorney General Waiver is invalid, unenforceable, unconscionable, void or voidable. In such instances and where the claim is brought as a private attorney general, such private attorney general claim must be litigated in a civil court of competent jurisdiction.

(Italics added.)

[4] See Viking River, supra, 142 S.Ct. at pp. 1925 (conc. opn. of Sotomayor, J.) (“[T]he Court reasons, based on available guidance from California courts, that Moriana lacks ‘statutory standing’ under PAGA to litigate her ‘non-individual’ claims separately in state court.  [Citation.]  Of course, if this Court’s understanding of state law is wrong, California courts, in an appropriate case, will have the last word.”).

[5] See Viking River, supra, 142 S.Ct. at pp. 1926 (conc. opn. of Barrett, J.) (“The discussion in Parts II and IV of the Court’s opinion is unnecessary to the result, and much of it addresses disputed state-law questions as well as arguments not pressed or passed upon in this case.”).

[6] Although they are not binding on this Court, the Court GRANTS Adecco’s unopposed request for judicial notice of two federal court orders enforcing the Agreement in other cases. (Evid. Code, § 452, subd. (d).)

[7] Plaintiff further contends that the Agreement does not identify which Adecco entity is party to the Agreement by filling in the blank at the beginning where the “Company” is to be defined. The Court GRANTS Plaintiff’s request for judicial notice of the fact that there is more than one Adecco entity (Req. for Judicial Notice ISO Opp., Ex. 1). (Evid. Code, § 452, subds. (c) & (h).)

Still, the Agreement’s signature line identifies “ADECCO” as the counterparty, and the “Company” is broadly defined to include all “affiliates, subsidiaries and parent companies….” So it is clear that Adecco and all its affiliates are parties to the Agreement. (See Jacobsen v. Aurora Loan Servs., LLC (9th Cir. 2016) 661 F.App’x 474, 476 [party to agreement was sufficiently identified by fictitious business name].)

[8] In any event, a reply declaration by Ms. Prentiss confirms the accuracy of her original declaration “under penalty of perjury under the laws of the United States of America and the State of California.” Plaintiff does not contend that Ms. Prentiss’s original declaration, if admitted into evidence under penalty of perjury under California law, fails to authenticate the Agreement or to establish that it involves interstate commerce. So any evidentiary deficiency on these points has been corrected.

[9] As raised by Plaintiff in her opposition, the United States Supreme Court recently held that under federal law, the same standard applies to the assessment of an asserted waiver of the right to arbitrate as to the assessment of waiver in other contexts. (See Morgan v. Sundance, Inc. (2022) ___U.S.___ [142 S. Ct. 1708, 2022 U.S. LEXIS 2514] (Morgan).) A finding of prejudice is not required. (See ibid.) While dicta in Morgan suggests that prejudice should not even be considered, the Court does not read Morgan to hold that this is always the case. (See id., 142 S. Ct. at p. 1713 [“Outside the arbitration context, a federal court assessing waiver does not generally ask about prejudice.”].)

As outlined above, California law also does not require prejudice to the party advocating a finding of waiver of the right to arbitrate, although it does permit the Court to consider any such prejudice. Here, Plaintiff does not contend that she suffered any prejudice, so the Court simply will not consider this factor.

Finally, Plaintiff contends that Morgan “undermines any argument that Adecco was somehow entitled to wait for the outcome of Viking River before moving to compel arbitration” because “nothing in the decision indicates that fact has any relevance to the waiver analysis.” But Morgan’s “sole holding” is that the FAA’s policy favoring arbitration does not create a different standard for waiver. (Morgan, supra, 142 S.Ct. at p. 1714.) Morgan is not relevant to the issue of how a change in the law impacts the waiver analysis.

[10] See Viking River, supra, 142 S.Ct. at pp. 1921–1922 (disagreeing “that Iskanian’s prohibition on PAGA waivers is inconsistent with the FAA because PAGA creates an intrinsically representational form of action”; the FAA “do[es] not mandate the enforcement of waivers of representative capacity as a categorical rule”), p. 1925 (“Under our holding in this case, [non-individual PAGA] claims may not be dismissed simply because they are ‘representative.’ Iskanian’s rule remains valid to that extent.”).

[11] The Court GRANTS Plaintiff’s request for judicial notice of the full text of the agreement at issue in Viking River (Req. for Judicial Notice ISO Opp., Ex. 2). (Evid. Code, 452, subd. (d).) The waiver-specific severability or savings provision in that agreement stated:

In any case in which (1) the dispute is filed as a class, collective, representative or private attorney general action and (2) a civil court of competent jurisdiction finds all or part of the Class Action Waiver unenforceable, the class, collective, representative and/or private attorney general action 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.

[12] In the original complaint, FCF was misidentified as Foresite Capital Management IV, L.P.

[13] To the extent Dr. Esfandyarpour contends it establishes another exception, Garamendi v. Executive Life Ins. Co. (1993) 17 Cal.App.4th 504 holds that a state court overseeing an insurance insolvency proceeding has in rem jurisdiction over the assets of third parties with an “identity of interest” with the insolvent insurer. It relies on statutes specific to the insurance context, and does not apply in the general bankruptcy context. (See id. at p. 514 [noting that “Section 109(b) of the Bankruptcy Code provides that a domestic insurance company is not eligible to be a debtor under the Code”].)

Dr. Esfandyarpour also improperly cites to several unpublished California trial court orders, which Court does not consider. Unpublished California opinions “must not be cited or relied on by a court or a party in any other action.”  (Cal. Rules of Court, rule 8.1115(a); see also Schachter v. Citigroup, Inc. (2005) 126 Cal.App.4th 726, 738 [trial court ruling has no precedential value]; Drummond v. Desmarais (2009) 176 Cal.App.4th 439, 448, fn. 4 [“in the absence of some additional showing—such as the conditions for claim or issue preclusion—the actions of other judges are simply irrelevant”].)  The Court admonishes Dr. Esfandyarpour not to cite unpublished California orders in the future.         

[14] On reply, Dr. Esfandyarpour abandons his argument based on this doctrine.

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