Laura Brewer et al vs El Encanto Inc

Case Number

22CV00660

Case Type

Hearing Date / Time

Mon, 03/24/2025 - 10:00

Nature of Proceedings

Motion: Approval of PAGA Settlement

Tentative Ruling

Laura Brewer, et al. v. El Encanto, Inc.                       

Case No. 22CV00660

           

Hearing Date: March 24, 2025                                    

HEARING:              Plaintiffs’ Motion for Approval of Settlement Under the Private Attorney’s General Act

ATTORNEYS:        For Plaintiffs Laura Brewer and Travis Pons, on behalf of themselves and others similarly situated: James R. Hawkins, Anthony Draper

                                    For Defendant El Encanto, Inc.: Emilie C. Woodhead, Samuel R. Freeman

                                   

TENTATIVE RULING:

The motion for approval of settlement under the private attorney’s general act is denied without prejudice.

Background:

This action commenced on February 17, 2022, by the filing of the original Class Action complaint, against El Encanto, Inc. (“defendant”), by Laura Brewer and Travis Pons (collectively “plaintiffs”), on behalf of themselves and all others similarly situated, for: (1) Failure to pay lawful wages, (2) Failure to provide lawful meal periods or compensation in lieu thereof, (3) Failure to provide lawful rest periods or compensate in lieu thereof, (4) Failure to reimburse employee expenses, (5) Failure to timely pay wages during employment, (6) Failure to timely pay wages at termination, (7) Knowing and intentional failure to comply with itemized employee wage statement provisions, and (8) Violations of the unfair competition law.

On April 21, 2022, plaintiffs filed the operative first amended complaint (“FAC”) containing all of the same allegations as the original complaint, but adding a ninth cause of action under the Labor Code Private Attorneys General Act (“PAGA”).

On May 23, 2022, defendant filed its answer to the FAC, asserting a general denial and 39 affirmative defenses.

Following several procedural events, including stays of the action, on February 26, 2024, the parties submitted a stipulation indicating that they had settled plaintiffs’ direct claims and the representative PAGA claims. Plaintiffs agreed to dismiss the class claims. The stipulation resulted in an order that included: “Plaintiffs shall dismiss their class claims.”

On December 27, 2024, plaintiffs filed the present, unopposed, motion for approval of the PAGA settlement.

Analysis:

            PAGA Settlement Approval

“Notwithstanding any other provision of law, any provision of this code that provides for a civil penalty to be assessed and collected by the Labor and Workforce Development Agency or any of its departments, divisions, commissions, boards, agencies, or employees, for a violation of this code, may, as an alternative, be recovered through a civil action brought by an aggrieved employee on behalf of himself or herself and other current or former employees pursuant to the procedures specified in Section 2699.3.” (Lab. Code, § 2699, subd. (a).)

“The aggrieved employee or representative shall give written notice by online filing with the Labor and Workforce Development Agency and by certified mail to the employer of the specific provisions of this code alleged to have been violated, including the facts and theories to support the alleged violation.” (Lab. Code, § 2699.3, subd. (a)(1)(A).)

“The agency shall notify the employer and the aggrieved employee or representative by certified mail that it does not intend to investigate the alleged violation within 60 calendar days of the postmark date of the notice received pursuant to paragraph (1). Upon receipt of that notice or if no notice is provided within 65 calendar days of the postmark date of the notice given pursuant to paragraph (1), the aggrieved employee may commence a civil action pursuant to Section 2699.” (Lab. Code, § 2699.3, subd. (a)(2)(A).

“Despite the fact that ‘a representative action under PAGA is not a class action’ [citation], and is instead a type of ‘qui tam action’ [citation], a standard requiring the trial court to determine independently whether a PAGA settlement is fair and reasonable is appropriate. Class actions and PAGA representative actions have many differences, with one salient difference being that certain due process protections afforded to unnamed class members are not part of PAGA litigation because aggrieved employees do not own personal claims for PAGA civil penalties. [Citations.] Nonetheless, the trial court must ‘review and approve’ a PAGA settlement (§ 2699, subd. (l)(2)), and the Supreme Court has in dictum referred to this review as a ‘safeguard.’ [Citation.]” (Moniz v. Adecco USA, Inc. (2021) 72 Cal.App.5th 56, 76.) “PAGA settlements are subject to trial court review and approval, ensuring that any negotiated resolution is fair to those affected.” (Williams v. Superior Court (2017) 3 Cal.5th 531, 549.)

“The superior court shall review and approve any settlement of any civil action filed pursuant to this part. The proposed settlement shall be submitted to the agency at the same time that it is submitted to the court.” (Lab. Code, § 2699, subd. (l)(2).)

There are numerous issues with the settlement and current motion. Following is a non-exhaustive list of these issues.

            Dismissal of Class Action

As noted above, the parties stipulated, and the court ordered, that plaintiffs would dismiss their class claims. However, they did not dismiss them.

“A dismissal of an entire class action, or of any party or cause of action in a class action, requires court approval. The court may not grant a request to dismiss a class action if the court has entered judgment following final approval of a settlement. Requests for dismissal must be accompanied by a declaration setting forth the facts on which the party relies. The declaration must clearly state whether consideration, direct or indirect, is being given for the dismissal and must describe the consideration in detail.” (Cal. Rules of Court, rule 3.770(a).)

“ ‘ “ ‘[T]o prevent fraud, collusion or unfairness to the class, the settlement or dismissal of a class action requires court approval.’ ” ’ ” [Citations.] The court must determine the settlement is fair, adequate, and reasonable. [Citations.] The purpose of the requirement is “ ‘the protection of those class members, including the named plaintiffs, whose rights may not have been given due regard by the negotiating parties.’ ” [Citation.]” (Dunk v. Ford Motor Co. (1996) 48 Cal.App.4th 1794, 1800-1801.)

Plaintiffs did not follow the required procedure to dismiss the class claims.

By filing the class action complaint, plaintiffs make allegations that defendant is liable to an aggrieved class of employees numbering “approximately over 100 Non-Exempt Employees in California who are or have been affected by Defendants’ unlawful practices . . ..” (FAC, ¶ 27.)

While the court offers no opinion, at this point, on whether it would approve dismissal of the class action: The PAGA allegations are included with the Class Action case, and it would be improper to approve settlement of the PAGA portion of the claim while the Class Action still exists because of the potential negative effects it would have on the class. The court is required to make an assessment of the reasons for the dismissal, the effect on the class, any compensation received in connection with the dismissal, and whether there exists any collusion. A noticed motion is required.

            Notice to the LWDA

By way of the FAC, plaintiffs allege that they gave notice, by certified mail, to the LWDA and defendant on February 16, 2022, of the specific Labor Code provisions alleged to have been violated, as required by Labor Code section 2699.3, and that they did not receive a response from LWDA within the proscribed time period. (FAC, ¶ 74.) The notice is not attached as an exhibit to the FAC.

By way of declaration, plaintiffs’ counsel declares: “On February 14, 2022, Plaintiffs provided timely written notice to the LWDA and to Defendant of Plaintiffs’ intent to pursue a Labor Code section 2698 [PAGA] claim.” (Draper Decl., ¶ 3.) The notice is not attached as an exhibit to the declaration.

In addition to the date in the declaration being different than the date in the FAC, plaintiffs have not provided the court with the means of determining whether the notice complies with Labor Code section 2600.3. Without that information, the court is unable to approve the settlement.

            Settlement Agreement

The settlement agreement, attached as Exhibit 1 to the Draper declaration, sets forth the monetary terms in paragraph 3.

Pursuant to the agreement, the gross settlement amount is $280,000.00. From that amount: (1) $98,000.00 is to be paid to plaintiffs’ counsel for attorneys’ fees, (2) $20,000.00 is to be paid to plaintiffs’ counsel for expenses, and (3) $5,000.00 is to be paid to the administrator (for unspecified services). Of the remaining amount after those deductions, the LWDA would receive $117,750.00 and the (unknown number of) aggrieved employees would split $39,250.00.

The proposed deductions are improper, and plaintiffs provide far too little information to assess the fairness of the settlement.

“An employee plaintiff suing, as here, under the Labor Code Private Attorneys General Act of 2004, does so as the proxy or agent of the state’s labor law enforcement agencies. The act’s declared purpose is to supplement enforcement actions by public agencies, which lack adequate resources to bring all such actions themselves. [Citation.] In a lawsuit brought under the act, the employee plaintiff represents the same legal right and interest as state labor law enforcement agencies—namely, recovery of civil penalties that otherwise would have been assessed and collected by the Labor Workforce Development Agency.” (Arias v. Superior Court (2009) 46 Cal.4th 969, 986 (Arias).)

The dispute is between the employer and the state. (Kim v. Reins International California, Inc. (2020) 9 Cal.5th 73, 81 (Kim).) The purpose of PAGA is not to recover damages, restitution, or redress the employees’ injuries, but to recover civil penalties to remediate present violations and deter future ones. (Id. at p. 86.)

With the exception that plaintiffs are not seeking an incentive award, the proposed settlement essentially follows the model for settlement of a class action and is inconsistent with Labor Code section 2699 et seq. As stated above, a PAGA representative action is not a class action. (Arias, supra, 46 Cal.4th at page 975.) “The civil penalties a PAGA plaintiff may recover on the state’s behalf are distinct from the statutory damages or penalties that may be available to employees suing for individual violations. [Citation.] Relief under PAGA is designed primarily to benefit the general public, not the party bringing the action.” (Kim, supra, 9 Cal.5th at page 81.)    

A PAGA civil penalties settlement is to be distributed “75 percent to the Labor and Workforce Development Agency for enforcement of labor laws, including the administration of this part, and for education of employers and employees about their rights and responsibilities under this code, to be continuously appropriated to supplement and not supplant the funding to the agency for those purposes; and 25 percent to the aggrieved employees.” (Lab. Code, § 2699, subd. (i).) There is no authority for reducing this amount by making unauthorized deductions.

Additionally, while “[a]ny employee who prevails in any action shall be entitled to an award of reasonable attorney’s fees and costs” (Lab. Code, § 2699, subd. (g)(1)), that amount is not authorized by statute, or otherwise, to be deducted from the PAGA civil penalties payment.

Because the settlement agreement, and proposed order, are inconsistent with Labor Code section 2699 et seq., and other relevant authority, the motion to approve settlement will be denied. Because there is the possibility of plaintiffs salvaging this case, by the filing of one or more appropriate motions, the denial will be without prejudice. Again, the above is not an exhaustive list of the issues with the settlement and other aspects of this matter.